Tax Law (Questions About Taxes)/Roof deduction??

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Expert: John Stancil, CPA - 11/5/2009


Question
Hello John.
I am renting a house to my sister in Georgia, I live in California. The idea is to rent it to her until she can afford the additional mortgage payments after I sell it to her and get my investment dollars back. She only makes the mortgage payments each month, nothing more, nothing less and I get the return on the interest each year until she takes over.
Anyway, we recently recieved a notice from the insurance agency to do improvements on the roof. Repairs have been estimated at $6,000.00 and replacing the roof is as much as $12,000.00. YIKES!!! Is this 100% deductable at the end of the year or is this a depreciation tax chopped over the years? The repairs come with a 2 year warranty and replacing the roof comes with a 15 year warranty. Thank you so much for any advice you can offer, Joanne

Answer
Joanne,

Thanks for your question.

The cost of repairs and replacing the roof is not deductible at all.  This is a personal use asset, so you cannot deduct or depreciate repairs and improvements.  Since you are renting the house for the mortgage payments only, this is considered a rental not for profit so you are not allowed a loss.  The income is reported on line 21 of the 1040 as other income and you can deduct the mortgage and taxes on Schedule A.

I would add that if she is making the mortgage payments you cannot deduct those as she paying them, not you.  But she cannot deduct them as she is not legally liable for the debt.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I teach tax and accounting at a small church-related college. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a part time tax practice for over 35 years. I am a member of the AICPA, National Association of Tax Professionals, and the Institute of Management Accountants. Visit my website at www.johnstancilcpa.com. Also visit my blog, www.thetaxdocspot.com. Prepare and file your own taxes at www.1040stancilcpa.com

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I hold a doctorate in Accounting, and four professional certifications: CPA, CMA, CGMA, and CFM. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 30 years and have taught accounting and tax at the college level for over 30 years.

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly.

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DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill College

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