Where are the CPAs or small business owners?

[LuckyTaxi]

Will this raise a red flag with the folks at the IRS?
I make about $31,500 a year. I just started in real estate investing in September and we're
about finsh with a house we bought. We wont be selling it until January but I have roughly $8000 of
stuff I can write off. I'm assuming I can write them off because they are stuff I bought from Home Depot to fix the house we're renovating. I have ALL my receipts but the thought of being audited is not something I wish for.

Also, I'll probably have a CPA do my taxes but just for my own information, which form in conjunction with my 1040 would I need to fill out to list my write-offs?

 

[wedi42]

the CPAs are in the phone book, give one a call,
a good one will save you more than they charge you.

 

[LuckyTaxi]

Originally posted by: johngute
the CPAs are in the phone book, give one a call,
a good one will save you more than they charge you.

I know that, just wanted some input from the folks on this board who are familiar with this area.

 

[Quixfire]

When you brought the house did you list it as primary or secondary residence with your mortgage company? Did you buy it personally or through a business name?

If you brought the house in your name and listed it as a primary residence then you can?t write off the home improvements.

If you brought the house as a secondary residence or through a company then you can write the amount off as improvements. Be careful with the amount if the IRS deems the amount excessive they might request you have the house appraised and adjust the tax value on the home.

 

[Gibson486]

Is CPA a CPA?

 

[LuckyTaxi]

Originally posted by: Quixfire
When you brought the house did you list it as primary or secondary residence with your mortgage company? Did you buy it personally or through a business name?

If you brought the house in your name and listed it as a primary residence then you can?t write off the home improvements.

If you brought the house as a secondary residence or through a company then you can write the amount off as improvements. Be careful with the amount if the IRS deems the amount excessive they might request you have the house appraised and adjust the tax value on the home.

The mortgage is with a company that ONLY lends to real estate investors. This house is NOT for my personal residence. The house was purchased under my name ONLY because the documents for my company didnt return in time. I had to settle under my name so I'm treating this as a sole proprietorship. So, will I be ok?

 

[Quixfire]

Originally posted by: lilcam

Originally posted by: Quixfire
When you brought the house did you list it as primary or secondary residence with your mortgage company? Did you buy it personally or through a business name?

If you brought the house in your name and listed it as a primary residence then you can?t write off the home improvements.

If you brought the house as a secondary residence or through a company then you can write the amount off as improvements. Be careful with the amount if the IRS deems the amount excessive they might request you have the house appraised and adjust the tax value on the home.

The mortgage is with a company that ONLY lends to real estate investors. This house is NOT for my personal residence. The house was purchased under my name ONLY because the documents for my company didnt return in time. I had to settle under my name so I'm treating this as a sole proprietorship. So, will I be ok?

If the house is not listed as your primary residence then you should be ok.

 

[EagleKeeper]

Originally posted by: lilcam
Will this raise a red flag with the folks at the IRS?
I make about $31,500 a year. I just started in real estate investing in September and we're
about finsh with a house we bought. We wont be selling it until January but I have roughly $8000 of
stuff I can write off. I'm assuming I can write them off because they are stuff I bought from Home Depot to fix the house we're renovating. I have ALL my receipts but the thought of being audited is not something I wish for.

Also, I'll probably have a CPA do my taxes but just for my own information, which form in conjunction with my 1040 would I need to fill out to list my write-offs?

This house is NOT for my personal residence. The house was purchased under my name ONLY because the documents for my company didnt return in time. I had to settle under my name so I'm treating this as a sole proprietorship. So, will I be ok?

Tax S/W will help solve all your problems. Depending on how you have the house listed as an asset, the Schedule C or E will apply.

If you are renting the house, the repairs are deductible. Schedule E with expenses and income.

If the house is for resale, then the repairs are not deductible, but an expense against the profit.
The profit will show up in your 2005 tax return. Schedule C with expenses against the profit.

Based on your statements, the Schedule C will apply. The house is not used for rental housing.
and is not a primary residence. You can not expense repairs against the unit, only against the profit on the sale.

 

[shenaniganz]

Originally posted by: EagleKeeper

Originally posted by: lilcam
Will this raise a red flag with the folks at the IRS?
I make about $31,500 a year. I just started in real estate investing in September and we're
about finsh with a house we bought. We wont be selling it until January but I have roughly $8000 of
stuff I can write off. I'm assuming I can write them off because they are stuff I bought from Home Depot to fix the house we're renovating. I have ALL my receipts but the thought of being audited is not something I wish for.

Also, I'll probably have a CPA do my taxes but just for my own information, which form in conjunction with my 1040 would I need to fill out to list my write-offs?

Tax S/W will help solve all your problems. Depending on how you have the house listed as an asset,the Schedule C or E will apply.

If you are renting the house, the repairs are deductible. Schedule E with expenses and income.

If the house is for resale, then the repairs are not deductible, but an expense against the profit.
The profit will show up in your 2005 tax return. Schedule C with expenses against the profit.

If its a rental doesn't he have to depreciate the the expenses if they add value to the property? (Thought I heard this somewhere--in no way am I any sort of expert).

 

[EagleKeeper]

Originally posted by: shenaniganzIf its a rental doesn't he have to depreciate the the expenses if they add value to the property? (Thought I heard this somewhere--in no way am I any sort of expert).

The rental will have a depreciation value that is used to reduce the tax burden. It is assumed that you will eventually have to replace the unit, and the tax laws are assisting you.

Repairs/expenses are allowed to be written off against income from the property up to a certain limit ($25K loss).

More than that amount of "loss" can be rolled over aginst the next year tax bill.

If you sell the unit, the the depreciation is recaptured as profit.

 

[Nuriko]

Eaglekeeper has the right of it, as well as more info can be found in pub 527 at irs.gov