topic Report expenses related to rental property in Investors & landlords

Report expenses related to rental property

nothing — Thu, 06 Jun 2019 08:57:42 GMT

We fixed/upgraded our rental property last year and we paid out of our pocket. Part is reimbursed by a related 3rd party this year. We wonder what to do in tax filing:

1) File net cost in last year return.

2) File net cost in this year return.

3) File what we paid as expense for last year and file what we received from the 3rd party this year as income for this year.

2nd Question:

As we also upgraded our place together with fixing, can we include this as the cost basis for the property? Our property value has appreciated some from our purchase price. We wonder if this cost could be added to the purchase price as the cost basis.

How should these funds from the third party be reported?...

KrisD — Thu, 06 Jun 2019 08:57:44 GMT

How should these funds from the third party be reported? are they gifts? Investments?

It is reimbursement for part of the repair. @TurboTaxKrisD

nothing — Thu, 06 Jun 2019 08:57:45 GMT

It is reimbursement for part of the repair. @TurboTaxKrisD

If you paid for repairs in 2017 you would claim those exp...

KrisD — Thu, 06 Jun 2019 08:57:47 GMT

If you paid for repairs in 2017 you would claim those expenses on your 2017 return if the rental was still active.

If a third party reimbursed you for the repairs in 2018, enter that as income on your 2018 return.

When the rental is first put into service the basis is determined. You can't adjust that. If you add value to the property with adding an "Improvement" such as a new roof, pool, or room addition, that improvement is added as an asset of the rental and also depreciated.

For example if the property was purchased for 200,000 of which 20,000 is the value of the land, 180,000 will be the value of the building and depreciated. If 5 years later the Fair Market Value of the property is 250,000 and you add a new roof for 12,000, the basis of the rental building is still 180,000 and the roof is now a new asset with a basis of 12,000. The roof will now also be depreciated.

The value can't be increased because of inflation because you will pay capital gains on the rental when you sell it. The gain is based on what you originally paid and the improvements you made. You will also "recapture' the depreciation you have taken on the building (and assets). Exclusion from gains of real property is only when the house is a primary residence and meet certain requirements. Even in this situation, any depreciation claimed (or could have been claimed) is "paid back".

@TurboTaxKrisD thanks for your reply. Say if repair my fl...

nothing — Thu, 06 Jun 2019 08:57:48 GMT

@TurboTaxKrisD thanks for your reply. Say if repair my floor and upgrade it at the same time, which costs me $3000, should I put that $3000 as my expense or as the new asset? Where to put it as a new asset? Thanks.