Rental Basics in 20147>Question Details

CubbieFan, Both Buyer and Seller in Stevensville, MD

Reporting Rental property income

Asked by CubbieFan, Stevensville, MD Wed Jan 27, 2010

Hi all, I currently own a townhome that I have been renting since August of 2009. Here are couple of things I am unsure of.
1) How do I determine cost basis of the rental property? The house value at the time it was first rented or when the property was purchased, in July 2008.
2) Will I be able to deduct full 100% of the property tax paid for the rental property since Aug 2009?
3) Will I be able to deduct full 100% of the HOA fees paid since Aug 2009?
4) How would I calculate the property value depreciation

Thank you!!!

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Answers

4
Rental investment property depreciation works as follows:
You can deduct a "paper loss" in value of the rental property, regardless of the actual change in value. The loss is calculated based on a 27.5 year value life span of the property, so divide the purchase price by 27.5, and that's your theoretical depreciation for a year.
That's my understanding as a landlord, but I'm not an accountant, so be sure and double check that with your accountant or with a friend in the industry, if you have one.
Happy tax deducting!
0 votes Thank Flag Link Fri Feb 5, 2010
Qs. 2 &3 : yes.
cost basis(if not involved in a 1031 exchange): Net price paid(purchase price - costs of purchase) - depreciation from the month of purchase to current month.
Each year u should take the depreciation expense every year.
IRS will assume thyat u took that expense whether u toolk it or not.
So u end up paying capital gains on depreciation u purportedly took.
rgds,
Ramesh Chandra
703 635 8209
mepcigroup@gmail.com
0 votes Thank Flag Link Sat Jan 30, 2010
You should be able to find the answers to your questions here:

http://www.irs.gov/pub/irs-pdf/p527.pdf
http://www.irs.gov/pub/irs-pdf/i1040se.pdf
0 votes Thank Flag Link Wed Jan 27, 2010
These are all great questions that are best answered by an accountant. If you'd like the name of one, please feel free to contact me for that information.
Web Reference: http://www.GottaHavePav.com
0 votes Thank Flag Link Wed Jan 27, 2010
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