hot tub depreciation

[jhendrsn1]

heater in hot tub failed, could not replace it, bought new hot tub and scrapped old, old hot tub was only half depreciated, can i depreciate balance this year?

[Mike9241]

not really. that's because you would need to override the TT calculation for depreciation which would void the accuracy guarantee.

what you can do is remove it from the asset listing noting the net tax basis and then on whatever schedule you report the depreciation report as a misc expense the net tax basis as "loss on scrapped equipment".

an alternative though not technically correct because there was no sale is to use the disposition section on the asset listing and show sold for $0

[DanielV01 · Accepted solution]

Yes and no.  Once depreciation is set on a schedule, depreciation itself must stick to that schedule.  So on the depreciation schedule itself, you cannot depreciate the remaining value of the hot tub.  

However, you can report the disposal of the hot tub as a "sale" of a business asset (which gets reported on Form 4797), which is then subject to ordinary gain and loss rules.  Since this "sale" is for $0, any remaining value from depreciation not previously claimed will be subtracted from this "sale", resulting in loss that is claimed against business income.

[Carl]

The simplest way is to show the hot tub as sold for $0. This way, the program will take care of deducting any remaining depreciation on the asset. (If you have any remaining balance to be depreciated.) It will also ensure that depreciation already taken is not recaptured in the future.

After you report this "sale" on your 2021 tax return, that will be the last tax return that asset will be shown on. When you import your rental data to the 2022 tax return next year, if that asset is shown then you can just delete it.

[Nev4tax]

@DanielV01 

Question for you. I was a NYC resident for 15yrs until 5/1/2021 (worked and lived in NYC).

However, I moved to Florida on 5/1/2021 and switched my office location to our Florida office. Therefore, I no longer have “sourced income” in NY state or NYC. In addition, I bought my apt in Florida in 2021 and sold my apt in NYC. Last, I spent more than 183 days in Florida. 

Since my move on 5/15/2021 I have had no NY withholding since my work location was changed. Further, I intend to pay NY state and city tax until my move (all of which was already withheld) and will not be asking for any refund of any withholding.

So I believe that “break” is clean with the sourced income, purchase and sale of property and spending more than 183 days in Florida.

Last, my only source of income is from my W2. I wanted to know what you thought probability of an audit is given I am not asking for a refund? obviously want to avoid such a head ache. I earn approx $800K per annum 

[DanielV01]

@Nev4tax   File as a part-year resident for New York and New York City.  This accomplishes what you are looking to achieve:  only claiming the income you earned while a New York resident to New York.  The statutory resident rule comes into play when an individual "maintains an abode" (New York's wording) for the entire year, and in addition maintains a physical presence in New York/NewYork City for more than 1/2 of the year (184 days or more).  Your situation tends to describe a "clean break"  that would only have you liable for New York State/City tax during the portion of the year you were living in New York.  The part-year resident return will ask you when you left New York, and probably the state you moved to.

I never comment personally on the likelihood of an audit because tax departments can audit for any reason and at any time.  Your situation would seem to be less likely to be audit-worthy, but if the state/city were to question your claim, any proof you have to support that you moved and are now working at a Florida location will back up your claims.  

And when you file your tax return, it will reveal whether you paid in sufficient tax or not for the portion of the year you were a resident.  If you overpaid, you are due a refund, which New York may have a way to donate to the charity of your choice if you are not interested in receiving it personally.  Claiming a refund in itself does not make you more likely for an audit.  Filing an inaccurate tax return makes you more likely to be audited.

(I think you meant to post your question on a different thread more related to your question, but we're happy to answer your question regardless)

[Nev4tax]

@DanielV01 

thanks Daniel. Very helpful. Yes, I would be paying the NY tax for when I was in NY.

After my move, I won’t have withholding as I moved office locations so no sourced income in NY. I also sold my apt in NY and bought in Florida.

Even tho I am never asking for a refund and paid all the tax to NY for Jan to May, will they still “automatically” question my domicile move? 

Basically, if you moved, paid what you owe and not asking for a refund, do they often still want proof of domicile move? 

Last question, if I didn’t do a partial return and instead filed fully in NY for 2021 and then filed in Florida for 2022 and have no sourced income in NY, do I still need to indicate a “move”? Or do you just filed 2021 in NY and Florida in 2022?

[DanielV01]

@Nev4tax.  That is why you want to do the part-year return.  New York will not "automatically" question your domicile; people move all the time.  But if you filed a full-year return, they will insist that all of your income is taxable in New York when it isn't.  If you have already filed a full-year resident return (IT-201), you will want to file an amended return so that it is a part-year return instead.

But filing a return is a requirement.  Just having withholdings deducted from your pay does not mean that you don't file a return because you've "paid enough".  Filing a tax return is a required reconciliation.  And if you are entitled to a refund, New York will send that refund to you.  (If you don't provide bank information for direct deposit, they would automatically send a check to the address you provide on your return).

And, you are correct to stop New York withholding.  If you were working from home, you might (and probably would) still have a New York tax liability (as a nonresident, if you no longer have a NY domicile or abode).  But with a Florida bona-fide office location, your income becomes Florida-sourced (no state tax) and not New York sourced.

To answer your last question, if you moved in 2021, you will file a part-year New York return in 2021, not a full-year return.  Florida has no state individual income tax, so you will not need to file an individual return for Florida.  

[Nev4tax]

@DanielV01 

thanks Daniel. Any chance you could give me a quick ring at [phone number removed]?

i think my question was not clear. Thank you 

[Nev4tax]

@DanielV01 

[removed]

[DanielV01]

@Nev4tax.  Your private information was removed from this public forum to protect your privacy..  Unfortunately, it is not possible for us to make phone calls from this forum.  But feel free to ask any clarifying questions.  Your situation is not terribly complicated, but my explanation may not be addressing the intent you have behind your question. So feel free to re-state what you don't understand or what I'm not addressing completely. 

[Nev4tax]

@DanielV01 

Thank you Daniel. My specific question is if I claim my move date is 5/1/2021 then I would file part year returns in NY and Florida and “claim”  or declare a move date if 5/1/2021. That is if I do partial.

However, I am asking if I file a full year return in NY for all of 2021 and then going forward in 2022 do not file a NY return (as I will have no sourced income in NY as in Florida now) do I need to “claim” somewhere I moved as I would on a partial return?

or do I just file in 2021 in NY and then stop filing for future dates as my income will be 100% in Florida in 2022? Specifically, do I need to claim I moved or just stop filing for NY

[DanielV01]

@Nev4tax.  If in 2022 you live in Florida the entire year and have no "New York-sourced" income in 2022, it will not be necessary to file a 2022 New York return no matter what.  

As far as 2021 is concerned, there is no compelling reason to file a 2021 full-year New York return.  If you do, New York will require you to include all of your 2021 income on your return and will tax all of it.  I know that if you made what you said in your original post, your tax on that amount will be considerably more than for just the portion of the year you are really responsible for New York tax.  Filing a part-year return for New York would usually mean that you also file a part-year return for the state to which you moved.  However, Florida does not have a state income tax return.  So you will still only file one state tax return:  a part-year return for New York.  The part-year return will include a move-out date (they require that to make sure your income is pro-rated to what was earned in New York).

One other possibility:  if all of your income on your W2 is also being reported to New York (and this can happen), you still file a part-year return and use the allocation screens to designate how much of the income was actually earned in New York as a New York resident.  But this would only be for 2021.  In 2022, if you are an employee with nothing but Florida-sourced income, you will not have a state income tax return to file.

[Nev4tax]

@DanielV01 

Very helpful Daniel. But if I file a part year return, do I need to “declare” a specific move date to NY, correct? (In my case 5/1/2021). So that brings into question them potentially challenging a change in domicile and may have to go through an audit.

So I am asking if I file a full year return in NY for 2021, and then for 2022 I am Florida resident with only Florida sourced income it is a “clean” break. So in this case do I need to “claim or declare” a move date anywhere?

Or do I just file NY for 2021 and then do not file in 2022 since all income Florida. Specifically, in this case do I need to indicate on 2021 return I am moving? Or since not in middle of the year you do not need to vs a partial return 

[DanielV01]

@Nev4tax.  Putting a move date on a part-year return is not in itself a motive to make your return more likely to be audited.  If it were audited, the likely point they would be looking for is proof of move, which shouldn't be that hard to do (registration with the post office, new driver's license, sale of old residence/new lease or new home, etc.)  If you don't have documentation such as this, that would be your only concern.

If you do claim full-year to New York, you don't have to fill out any NY tax forms next per se, but New York could still send you a notice asking why you didn't.  And, again, if you claim full-year resident, you will pay tax on 100% of your income, instead of around 33% of it.  With what you stated as your income, it's a significant amount.  

To sum up:

2021.  You must file a New York return.  It is overwhelmingly better to file a part-year return for the reasons I mentioned earlier, but you must file.  

2022.  You do not need to file a return for New York if you neither live in New York nor earn money from New York sources.  But if you file a 2021 New York full resident return, New York could question why you are not filing a 2022 return of some kind.