Discussion:Re income property expenses while remodel
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Discussion Forum Index --> Tax Questions --> Re income property expenses while remodel
| 9 January 2007 | |
| client has rented condo for over twenty years, and is remodeling, spending 30k, and taking her
time - 2 years - since her loan is paid off. can she continue to take her homeowner assn dues, prop taxes, and ongoing deprec expense, with zero income reported on her taxes? | |
| 9 January 2007 | |
| I would say yes if this home does not have homestead and has virtually been rental property.... | |
Death&Taxes (talk|edits) said: | 9 January 2007 |
| But the property is not in service, is it? Can you depreciate a property not in service? It's not available for rent. Of course, this raises hell with the software. Real estate tax should be deductible somewhere. | |
Michaelstar (talk|edits) said: | 9 January 2007 |
| If the rental property is "not placed in service" then I find it hard to justify these expenses as Schedule E expenses. R/E tax would probably just go on Schedule A in the taxes sections but unfortunately the other expenses would be investment expenses limited to 2% of AGI. Also seems to me that if this property is under construction - then why not look at Sec. 266 to possibly capitalize these "carrying charges". | |
| January 9, 2007 | |
| You're right, DT and Michael. If a rental property is not available for rent during a period of remodeling, you can't deduct any expenses on Sch E for that period of time. I'm pretty sure this is in the Sch E instructions. I deduct the property taxes and mortgage interest on Sch A for the period the property was unavailable to rent, and will usually add the other expenses to the improvements being made during the time it was being remodeled. In this case, yes, DT, you have to fiddle with the depreciation, since ProSeries doesn't have a box to check that the property was unavailable for rent. | |
Death&Taxes (talk|edits) said: | 10 January 2007 |
| Deb: I use .001 for a life, usually brings it out to zero on all but properties costing a gazillion.....but would this use two years of the 27.5 years useful life? My question is hypothetical, not real. | |
| January 10, 2007 | |
| It probably would, and I'm trying to remember how I've handled this in the past. I think I will override the current year deduction and change it to zero, but what I can't remember is if the return can't be efiled when I do that. If it can't be efiled, then I think I just delete the assets and keep a copy of the prior year's depreciation in the clients' folders (and hope they don't have a long list of assets to reenter the next year). | |
| January 10, 2007 | |
| Reading your question again, I don't think I have any clients who have held their rental properties for 27.5 years before they sold them, and it's a problem I don't think I'll have to worry about. | |
| 10 January 2007 | |
| Michael has the right answer here. To take property out of service from a software point of view use disposition at basis. | |
| 10 January 2007 | |
| isn't there some analogy to having to repair a property - say 3 months, before it can be rented again. do you stop depreciation and other expenses during that time? Doesn't the irs
say you must take depreciation, and if you dont, they'll reduce your basis anyway? | |
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