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Tax Planning/Investment Property


Hi, and thanks for reading my question:

I bought a house in VA on August 2012, i bought it as an owner-occupant with FHA financing. I spent time and about $10k at HomeDepot to renovate the house and moved in it on February 2013.

I currently live in the house, however, I want to rent it out or rent out rooms in it (I rented out one room to a friend for a few months). In fact, I'm in the process of buying a townhouse and move into it (and rent out the first house for profit).

My question is:
Is there any benefit from considering the house as an investment on my 2012 tax? Am I allowed to?  Will the renovation money result in any tax credit to offset my wage income? or only rent income?

You can't consider it an investment property for 2012 if you lived in the property.  You can begin this as a rental or partial rental based on when you placed it inservice as such.  You can begin proportional depreciation based on the percentage of use as a rental.  The renovation money will not count.  It gets added to your basis in the property.

I hope this helps.

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As an Enrolled Agent, I am fully capable of providing tax advice as it relates to personal and business income taxes. Enrolled Agents are the only Federally licensed tax practitioners and are admitted to practice before all administrative functions of the IRS. My specialty is working with small business owners who file Schedule "C" and helping them to structure their business in such a way as to maximize as many tax advantages as possible. I also enjoy working with individuals who have both routine as well as complex tax situations. I prefer to concentrate on individuals and small business tax planning.


I have a 25 year background in financial services including tax, bookkeeping, insurance, real estate and securities. I was previously the Chief Financial Officer of a local and national franchise organization. I am currently semi-retired, but used to own (in partnership with another EA) an individual and small business financial engineering firm where I work with nearly 2,500 individuals and small business owners in nearly every state and almost every continent, assisting them in all aspects of their tax and financial well-being. I have prepared or reviewed more than 8,000 tax returns in my career.

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