Rental properties and tax stuff

[Hornin04 262]

I'm thinking of purchasing a seasonal rental in a beach town in the northeast. I'd rent it out for the majority of the summer but use it for personal purposes for the allowed time in order to claim rental income and all of the tax breaks that come with it. That is, until some time before retirement when I'll likely tear the entire thing down and make it my summer house.

 

The property I buy will likely need significant upgrades prior to tearing down in a couple of decades. These cottages are mostly built in the 1940s and on, and many are still for the most part original.

 

Anyone have experience in what can be claimed as a tax deduction when doing repairs and renovations to a rental property?

 

For instance, I know by the books that anything that keeps the property in good working order would qualify as a repair... But what about refinishing the floors? Adding proper insulation (and some new walls along with it)? Replacing old appliances? Finishing an attic that is listed as a bedroom by adding built in, walls, insulation etc?

 

Also, any idea how it works with a seasonal rental when you purchase it at the end of the rental season? So if I were to close this fall but not be able to rent it until summer 2022 are there any tax benefits even though I hadn't collected any rental income yet?

 

[NeverMarryAStripper 22241]

[UT_OB1 2260]

All the repairs you listed should be claimed. Essentially, you need to start a spreadsheet with a spot for all income and spot for ALL expenses.  Keep track of the miles you drive and food (cost) as well. 
 

Some of the repairs / upgrades can be accelerated and considered one time expenses or they can be depreciated. You’ll have that option at tax time, and since it sounds like you’ll not have much rental income the first year, you’ll probably want to depreciate as much as you can. 
 

If your agi is over $100k, max out your 401k and start finding other ways to reduce it. You get to claim up to $25k passive losses, but it starts phasing out at 100k agi, and is completely gone by $150k. So if you make 100k agi, and your depreciation plus expenses show a $20k loss, you’ll only be taxed on $80k. However, if you make $125k agi, you’ll only get to deduct $10k, and be taxed on 115k. At $150k agi, no deductions. 

[ROFL BOX 6654]

While I was waiting for your image to appear, I had hoped it was going to be this one:


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