Posted by Frank Chin on February 14, 2004 at 10:35:47:
Bob:
You got the right idea. Spend a few dollars on a GOOD CPA, even if its for this year, and you plan on doing things yourself afterwards. Keep the GOOD CPA if you’re going to be in the biz the long haul as you’ll need it.
The short answer is if you bought the place, and my guess is you haven’t sold it yet, there’s nothing to report till you fixed it up and sold it.
The taxes you’ll wind up reporting is what you “sold it for” less “the basis”. The basis is what you paid for it PLUS everything you put into it. This would even include milaege on your car if you kept good records. And it’ll be reported for the tax year that you sold it.
As to tools, you write off most or all of it depending on how agressive you want to be. Check with your CPA.
I’m a landlord, and I’ve been charging off all expenses less than $600.00, including tools, and appliances, on an ongoing basis. You’ll be adding that in to your basis.
I’ve read about 50% of the archives on “tax” and “income tax” but there is nothing there for my specific question.
First, I’m new to real estate investing. I decided to ‘jump in’ and in October/03 I bid on and won 3 SFH at a tax auction. Three months later I took title and possession. I started fixing them and plan on selling all to replinish my cash reserves (I should have been more creative and bought with no cash but in Oct. I was excited to get involved and I jumped in). I’m learning!!! I have not set up a LLC, S-Corp or trust at this point (I plan on that later this year).
I would like advice on where to deduct the money I’ve spent on repairs. Do I separate money spent on tools and misc items vs lumber and cabinets (I think so). That being done, which tax forms do I use to deduct my expenses? I plan on using Turbo Tax and when completed have an accountant look them over. Any advice and instruction will be appreciated. Don’t let my rambling interfere with your excellent advice. If I’m not asking the right question then read between the lines and give me your best advice.