AboutJohn Stancil, CPA Expertise 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 30 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.
Experience I hold a doctorate in Accounting, and four professional certifications: CPA, CMA, CFM, and CIA. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I write a monthly tax column for the local newspaper. I have prepared taxes for over 30 years.
Education/Credentials DBA University of Memphis
MBA University of Georgia
BS in Accounting Mars Hill College
At the end of February, 2008, I purchased a home for long term investment in a very good location, on a short sale at $525K (when it was actually worth $625K) with roughly $17K worth of closing and other costs. I spent $55K fixing it up for 3 months which included major work such as gutting bathrooms and framing a room, etc. In the 3 months, I paid 2 months' worth of mortgage. It was rented from June through December at a loss of $700 per month. The latest tax assessment puts the value at $629K with the building at $239K. Market value is $675K. What would be my tax basis for depreciation? What can I claim as expenses for last year? I manage this property myself, so would I be subject to the maximum of $25K for both depreciation and loss? I have since moved into it
Thank you in advance,
Sandra
Answer Sandra,
Thanks for your question.
Your tax basis for depreciation is your cost. In this case, that would be the purchase price (including closing) minus an amount for the land plus capital expenditures (the $55K).
You can deduct the mortgage interest, depreciation, and any other expenses associated with the rental unit.
You can deduct up to $25,000 in losses if your modified adjusted gross income is under $100,000. Any unused losses carry forward and can be deducted when the property is disposed of in a taxable transaction.
Since it is now your personal residence, when you sell the property, you will not be able to exclude gain for the period of time you occupied the house.
