2008 co-op apt. converted to 2024 Rental

Forum|Forum|1 year ago
March 18, 2025
1 reply
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TO Carl - if possible,

Thank you for your many excellent responses re conversion of owner to landlord. I'd appreciate any help you can offer re my 2024 conversion of coop apt. to rental apt.

Determining basis - Purchased coop in 2008. Do I need 2008 closing docs?

How do I determine land %?

I actually have 2008 vague appraisal & some 2008 paperwork.
Do I need to compute coop basis/coop expenses added from 2008? If so, how?

I'm not sure how coop's o/s underlying mortgage values, at different dates, come into play.
Or just use Market Value?

My unit's specific mortgage is paid off.

Do I want to claim Safe Harbor status.??? Most of my own immediate expenses are less than $2500 each. Not sure I really understand Safe Harbor.

05/2023 Started trying to rent my co-op, on my own. (no major expenses in 2023- just local fees, last minute fixes.)
11/2023 Listed with a realtor (tenant paid fees) .

12/23 I started living elsewhere, leaving only enough items for "staging" and occasionally stopping by to insure apartment was in good order for showings.

05/01/2024 Renter moved in .

Willing to start this whole process, for tax purposes, from 01/24 through 12/24.

National Management firm has FT office on property and issues monthly statements, with multiple line items:

Assoc. Fees, Mortgage (underlying), R/E Taxes, Reserves, optional amenities like parking.
Please see attached 12/24 monthly "Shareholder" statement.

Where do I enter each line item's 12 month total?
How do I classify these line item's annual amount on 2024 & future years' Schedule E ?

Coop's accounting firm sends y/e 1098 showing per share/total, underlying mtge interest amount and real estate amounts. I don't understand the additional explanations in the form's in the cover letter. I did not save all of past years' cover letters plus these letters' information has varied, based on different accountants/regulations over the years.

How would I apply these comments to Schedule E 2024 and future years?

I feel I am close to understanding....but worried how year 1 decisions truly impact the point of sale (hopefully not for a while.) Thank you in advance for whatever details you can provide.

RobertB4444

Level 15

To start with you need the closing docs from 2008 only because you need the amount you paid. That is the depreciable basis for the property.

There are different schools of thought on land value. I usually set aside 10% and call that the land value.

The IRS allows you to deduct ordinary and necessary expenses. The fact that this is a co-op doesn't really come into play other than the costs of maintaining your rental are paid to the co-op board instead of an HSA or something. Any expenses that you have to pay in order to maintain the apartment and rent it are deductible. In the rental section there are a number of boxes for the different expenses necessary. If none of them seem correct to you there is also a section to write in any expenses that you have.

Your apartment was 'for rent' the first day it was available for rent in December of 2023. Your plan to start the rental period January 1st is fine but you will lose any expenses from December because the expenses need to be taken in the year they are incurred. If you had a lot of expenses in December it may be worth amending your 2023 return and starting the rental with a loss for that December.

The letter you attached isn't legible I'm afraid. But if it lists values from the co-op then that really doesn't apply to your rental business. If it lists expenses that you will be paying then they are deductible as soon as you pay them.

@KathyF

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KathyFAuthor

Level 2

Hi,

It's me again!

Waiting for my Depreciation Info on Premier 2025. Last thing I need to do so I can file.

Does the BBB impact really tiny coop rentals that much?!? Any work arounds you might suggest.

However, since I'm writing to you ( a few minutes ago I accidentally found you & reached out - not realizing you helped me last year), how/where do I add 2025 amortized principal of underlying mortgage and actual reserve monies used in 2025 to replace and improve long term assets ( roofing, building facade, plumbing and more) to my increase my existing basis.

Lastly, I selected the De Minimus option to expense items less than $2500. Is this an annual election or am I good going forward for 2025 and future, automatically?

Thank you in advance. Glad you're still out there. @RobertB4444

RobertB4444

Level 15

The OBBBA doesn't have much to say about your co-op apartment one way or the other. So you're good on that front.

When you make an improvement to your rental property the improvement should be depreciated as a separate asset. So a new roof creates an asset called "New Roof" and gets depreciated for 27.5 years starting the day that it is put into service.

If you decide to expense an improvement because it is less than $2500 or something then it is a one-time expense, it doesn't effect your basis at all.

The de minimus thing is good going forward. No need to worry about it any more.

Keep on keeping on @KathyF

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