rental property income and expenses

[Anonymous]

i own a rental property in MD. this is my first time being a landlord and 2016 was the when I had my first tenant.

can someone explain how depreciation works for an investment property? how does the CPA calculate depreciation? based on my purchase price? something else?

[Anonymous]

You get to depreciate a fraction of the building value, not the land value. I think it is 1/20th. It really, really helps your taxes now. But, when you sell it, you re-capture all that depreciation... and then it comes back to haunt you in your taxes (potentially).

If you get turbo tax, it does it all for you. But, you have to figure out what portion of the current value is the land and what is the building. You can use the percentages used by the tax assessor (your tax assessment) to figure those numbers out based on the actual value (not the tax assessment value).

[Anonymous]

Correction: the useful life is 27.5 https://www.zillow.com/blog/tax-savings-rental-property-depreciation-explained-112255/

[Anonymous]

Anonymous wrote:i own a rental property in MD. this is my first time being a landlord and 2016 was the when I had my first tenant.

can someone explain how depreciation works for an investment property? how does the CPA calculate depreciation? based on my purchase price? something else?

Get an accountant there are different ways to depreciate and they know the fine details. Turbo tax just does it one way.

[Anonymous]

Or you can read a book like the "for dummies" series. This is such a common thing -- you don't need an accountant just because you are a land lord. Put a little effort into it and get one of the books. OR you can spend $$ paying your accountant!

[Anonymous]

I have a large long term rental since the 90's. Get a CPA to do it, they think of things you'll never know about and are up on the new laws. Keep all your receipts in a folder. For example: any work done, hardware, painting, pool service, home depot, landscaping, advertising, credit check expenses etc.

Never throw them away because if you sell the home you can use all that for depreciation to offset the taxes you will have to pay. Do NOT do Turbo Tax.

[Anonymous]

Anonymous wrote:I have a large long term rental since the 90's. Get a CPA to do it, they think of things you'll never know about and are up on the new laws. Keep all your receipts in a folder. For example: any work done, hardware, painting, pool service, home depot, landscaping, advertising, credit check expenses etc.

Never throw them away because if you sell the home you can use all that for depreciation to offset the taxes you will have to pay. Do NOT do Turbo Tax.

Why not Turbotax?

[Anonymous]

We own 2 rentals and we pay our accountant $250. It well worth the security of our taxes done correctly. If I did them I am sure I would miss something and can see a bill from 5 years ago with interest due. Not worth it. Hire a cpa and let them coach you and let them do your taxes.

[Anonymous]

Anonymous wrote:i own a rental property in MD. this is my first time being a landlord and 2016 was the when I had my first tenant.

can someone explain how depreciation works for an investment property? how does the CPA calculate depreciation? based on my purchase price? something else?

At the end of the year they will add up all your receipts for repairs, advertising, cleaning, credit checks, taxes paid, mortgage, to offset your tax liability. Even though I get almost twice the amount of rent as my mortgage I've never paid taxes.

Based on your purchase price I believe there's a depreciation factor the longer you own it. I would do a consultation with your CPA so you know what kinds of thing you need to save and do. If you end up selling it you will get hit with the investment property tax, but if you end up living in that home for 2 years before you sell it you could avoid that because that would be considered your primary home at that point. Again talk to your CPA.

[Anonymous]

Anonymous wrote:We own 2 rentals and we pay our accountant $250. It well worth the security of our taxes done correctly. If I did them I am sure I would miss something and can see a bill from 5 years ago with interest due. Not worth it. Hire a cpa and let them coach you and let them do your taxes.

I just paid ours almost $380.00 but we have a primary home, rental, small home business, and other stuff. I have a organizer the CPA gives me to prompt me to bring in all the stuff. They have saved me a ton of money.

[Anonymous]

Anonymous wrote:I have a large long term rental since the 90's. Get a CPA to do it, they think of things you'll never know about and are up on the new laws. Keep all your receipts in a folder. For example: any work done, hardware, painting, pool service, home depot, landscaping, advertising, credit check expenses etc.

Never throw them away because if you sell the home you can use all that for depreciation to offset the taxes you will have to pay. Do NOT do Turbo Tax.

I use Turbotax and it works fine. I save all receipts related to the property, and just keep a simple Excel spreadsheet with a list of those expenses.

Then I sum it up in Excel, and enter the number for each category (interest expense; property taxes; maintennce; etc) in separate boxes in Turbotax. It works fine.

One year I had an accountant do our taxes also to compare, and they screwed up the depreciation (not in our favor) on some improvements to the rental. Turbotax did it correctly since it asks you details about the improvements and knows what schedule to use.

At least for my rental properties, I have less than 10 line-items of expenses each year (maintenance mostly) so it's not that much of a hassle. Takes me under 10 minutes.

[Anonymous]

I'll have rental income this year as well, so I'll utilize a CPA until I get the hang of it on my own, should have my CPA cert by year's end but I doubt that'll make me an immediate tax expert....

[Anonymous]

If you have a simple tax situation then use Turbo tax. Otherwise a CPA can help you improve your future tax situation by suggesting things to look out for in future returns. The value of having an accountant is to provide future guidance, and answer your tax questions going forward.

Most suggest getting an accountant when you own rental properties or are planning to sell some real estate. They can help you use like kind exchange.

[Anonymous]

Anonymous wrote:I'll have rental income this year as well, so I'll utilize a CPA until I get the hang of it on my own, should have my CPA cert by year's end but I doubt that'll make me an immediate tax expert....

I done the rental thing for years and still utilize a good accountant. At some point I plan to sell, my accountant has told me how to go about that.

[Anonymous]

Anonymous wrote:I'll have rental income this year as well, so I'll utilize a CPA until I get the hang of it on my own, should have my CPA cert by year's end but I doubt that'll make me an immediate tax expert....

I'm also do the management part and finding the renters, lol. No matter how much of an expert I think I am once in a while a renter manages to surprise me. I told my husband the next rental I would like to administer a psychological test as well as the background check!