Rental house and taxes. Tips?

HardDrive · 03-20-2014, 12:13 PM

This will be the first year we are going to have rental income. We bought the house in 2012, and spent considerable $ bringing it back to life. Started collecting rent checks in July 2013.

I realize the rules for depreciation are a bit too involved to get into here, but I was looking for any sort of general tips on reducing my taxable rental income. I have every scrap of paperwork to backup the improvements we made to the house.

Normally I would hand all this to an accountant and say 'have it buddy'. But we moved to a new state in 2013 that has income tax (from a state that doesn't), and I want to do them myself (using Turbo Tax) so I get an in depth look at how the new state and local taxes add up.

Any advice appreciated.

Rot 911 · 03-20-2014, 12:38 PM

Yep, Turbo Tax or the H&R tax program. I use H&R, but have used Turbo in the past. I will work out all of the depreciation for you. You will need to know the totals on your rental income and expenses. Don't forget the insurance, property taxes and mortgage interest!

recycled sixtie · recycled sixtie's Garage

I use Turbo Tax and rent out our condo and I don't know if you have the same general tax rules as we do. What can help us pay no income taxes is CCA(capital cost allowance or depreciation on property building, appliances etc) on the rent. However the final day of reckoning comes when you sell your property here.

I have taken a few accounting/tax courses so perhaps it makes it easier for me to do Turbo Tax. US landlords will chime in I am sure. Acquire the knowledge or pay somebody to do the taxes for you. It really is not that hard. Guy.

Hugh R · 03-24-2014, 04:20 PM

I apparently make too much money to write off losses on income property each year, but I can carry the losses forward against the sale of my beach condo when I sell it.

aigel · aigel's Garage

Hi Hugh,

How do you keep track of these losses over the years to document them when you sell the property?

Cheers,

George

LakeCleElum · 03-24-2014, 06:14 PM

Turbo Tax: The first year you use it, you will need to set up all of your costs for the property. This will establish your depreciation schedule and figure it automatically each year after that.

During each year, be sure to know the difference between a "repair" and a "capital improvement"...You can't deduct the whole cost of a capital improvement in the year you spent it; it has to be "depreciated"....There is a difference between a "roof repair" and a "roof replacement". The repair can be deducted in the tax year the money was spent.

I have used TT since 1994......During that time, I've set up a rental with it and then reported the sale of the property by doing my taxes myself.....

Also, be sure to keep a record of your trips and any mileage associated with the rental.....

Hugh R · 03-24-2014, 06:54 PM

My accountant keeps track of expenses and accrues them, if that is the right term. It kind of sucks since I don't have any other way to accrue expenses. What will suck is that if I bought a widget for $1 in 2009 I can only write off the same widget for $1.00 ten years later. I had the same problem when I sold my Aston Martin DB4, I bought a spark plug in 1971 for $0.49 and could only write off $0.49 for said spark plug 35 years later, against capital gains.