What does it take for "investment property" write offs? (tenant, square foot)
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Was reading a thread in personal finance where someone asked about taking write offs on a lot. People were saying if it hadn't been done all along as an investment property then it was personal property and couldn't be done.
Which made me wonder, what is considered investment property? Do you have to get it registered as such at the county? Can you reverse it back to personal? What are the criteria?
you need to take the necessary deductions all long like depreciation , rents , etc or follow section 266 if it is empty land... you can do anything you like down the road but depreciation gets recaptured whether you took it or not .
it is the steps you take along the way when you do your taxes that determine what it's use is .
the problem with turning an investment property in to personal use is if you make it a primary later on , the exclusion gets prorated that you normally get on a primary residence by the total time you own it .
you need to take the necessary deductions all long like depreciation , rents , etc or follow section 266 if it is empty land... you can do anything you like down the road but depreciation gets recaptured whether you took it or not .
it is the steps you take along the way when you do your taxes that determine what it's use is .
the problem with turning an investment property in to personal use is if you make it a primary later on , the exclusion gets prorated that you normally get on a primary residence by the total time you own it .
Primary residences can be converted to investment property if you make another property your primary (and it's not advisable to go back to that being your primary after conversion as per the above.). Most people who run a business for example from their home can deduct the office space per square foot. You also need to look into local zoning laws about operating a business in a residential space. If you have equipment used for the business you can do a depreciation schedule or write it off as an expense depending on what it us and how much it costs. In any case once you start thinking about doing this it's essential to talk to a good CPA.
Primary residences can be converted to investment property if you make another property your primary (and it's not advisable to go back to that being your primary after conversion as per the above.). Most people who run a business for example from their home can deduct the office space per square foot. You also need to look into local zoning laws about operating a business in a residential space. If you have equipment used for the business you can do a depreciation schedule or write it off as an expense depending on what it us and how much it costs. In any case once you start thinking about doing this it's essential to talk to a good CPA.
cpa's are corporate auditors , keep that in mind .. most only know what they know and they may know very little about other tax situations ....
it is like my daughter in law heads the tax dept for a very famous hedge fund , she is a cpa ... but that does not mean she knows much when it comes to personal tax situations or investment property ...you need a tax adviser who specializes in these kinds of things and not really a cpa which is a whole different field .
it is like going to a cardiologist when your really need an orthopedist ... they are both doctors but specialize in different areas .
that's a wrong answer, as many licensed CPA's only practice in the personal/small business world.
like i said , don't assume a cpa is the right person for the job .... many only know their area of expertise.. i guarantee you if you ask a cpa about the ramifications today of making a rental property your primary most will not know about the prorating today , just because they are cpa', unless this is the area they are in . .most do not keep up with changes in tax law in areas they do not do. a tax accountant is usually going to be the right person for personal tax issues if that is the scope of their work ..
Last edited by mathjak107; 04-06-2019 at 02:47 PM..
And some are in private practice partnerships serving all manner of clients; business and personal.
Among these services will be tax advising and practice area specializing.
Real estate, especially at the low end, is common enough that most will do that well too.
So if I have empty land, put an RV on it for personal use, but rent it out sort of air bnb style a couple of weeks - does that make it investment property?
...but rent it out sort of air bnb style a couple of weeks
That's just inviting a PITA into your life.
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