Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
betsy3
New Member

Federal employee in Kenya. they are not reimbursing for our vehicle storage as they wouldn't ship them. We also are renting our home and need to deduct the utilities.

 
1 Best answer

Accepted Solutions
Carl
Level 15

Federal employee in Kenya. they are not reimbursing for our vehicle storage as they wouldn't ship them. We also are renting our home and need to deduct the utilities.

"we own the home and it is in good standing, we had the option to take what they offer or find our own"

I'm not seeing where the above statement fits in to anything. So I'm ignoring it.

Your vehicle and any other excess storage cost being paid out of your pocket just are not tax deductible for the reason cited by Opus_17 above.

For your rental, there's two things I want to point out to you that concern the TT program and your rental. As you are working this through for your first time dealing with a rental.

 - Read every word on every screen *BEFORE* you enter data or make selections. I just can not stress the importance of this, and how it will cost you $$$MONEY$$$ (and lots of it) down the road if you do this wrong in the first year.

 - If while working through the rental stuff, you have questions, then***ASK***. The only stupid question is the one you do not ask. And with that definition, understand that stupid is expensive.

Now I'm not trying to scare you here. You can do this yourself. I've been doing it myself with rentals for over 25 years. So when it comes to mistakes, I've been there, done that, got the T-Shirt *and* paid the piper. Just read all the print, and particularly the small print on all screens. The small print matters, big time for many folks. What follows are some clarify and definitions you will find helpful, will save you time, and hopefully avoid mistakes that could be costly down the road.

Rental Property Dates & Numbers That Matter.

Date of Conversion - If this was your primary residence before, then this date is the day AFTER  you moved out.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. vacant periods between renters count also PROVIDED you did not live in the house for one single day during said period of vacancy.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence or 2nd home, after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.

RENTAL POPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED

Property Improvement.

Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.

To be classified as a property improvement, two criteria must be met:

1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.

2) The improvement must add "real" value to the property. In other words, when  the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.

Cleaning & Maintenance

Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent are not classified as cleaning/maintenance costs. They are instead classified as startup costs, amortized as such and depreciated over time.

Repair

Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent are classified as startup costs, amortized as such and depreciated over time.

Startup Costs

Please note that if residential rental income is not your PRIMARY business, and your PRIMARY source of income, then your rental business is considered to be passive, and you flat out, no way, no how , are not allowed to deduct your startup costs. Period. The IRS says so. See https://www.irs.gov/pub/irs-drop/rr-99-23.pdf and please take note that rental property produces “passive” income, while other types of businesses produce “active” income. Your rental property is not classified as your “active” business, unless you are a real estate professional, an active participant in the management of the property, and it provides a substantial (more than half) amount of your taxable income for the year. All three requirements must be met. There are no exceptions

Start up costs are expenses incurred while preparing the property for rent, with the express purpose being to prepare it for rent, before it is available for rent. These costs do include repair, cleaning and non-recurring maintenance cost. It does NOT include property improvements. With a normal business that produces active income (rental income is passive) you would amortize these costs over 15 years. But you can’t do that with a rental property. However, you can deduct a maximum of $5000 in startup costs in the first year the rental is available for rent, PROVIDED your total startup costs do not exeed $50,000. This is reported on line 18, “Other Expenses” of SCH E, and should be labeled “start up expenses”.

Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.

However, when you do something like convert the garage into a 3rd bedroom for example, making a  2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.


View solution in original post

7 Replies
Carl
Level 15

Federal employee in Kenya. they are not reimbursing for our vehicle storage as they wouldn't ship them. We also are renting our home and need to deduct the utilities.

Who is "they"???
Also, by "we are renting our home", do you mean that you are paying rent for the home you live in? Or are you collecting rent for a home you own that someone else is living in? Where is this home? Keyna?
betsy3
New Member

Federal employee in Kenya. they are not reimbursing for our vehicle storage as they wouldn't ship them. We also are renting our home and need to deduct the utilities.

The federal government.  Our Alaska home is currently being rented and managed by a gov appointed agency and we pay for trash/water/lawn and managment fees.
Carl
Level 15

Federal employee in Kenya. they are not reimbursing for our vehicle storage as they wouldn't ship them. We also are renting our home and need to deduct the utilities.

I hate making assumptions, because I'm usually wrong. Is your Alaska home being rented out "to" you? Or do you actually own the house and it's being rented out "for" you? Also, because I don't know yet how this could affect things, why did the government appoint the management agency, instead of you using a management agency of your choice? Is the property in foreclosure maybe? If os, then depending on other factors, it could directly affect how things get reported on a tax return.
Opus 17
Level 15

Federal employee in Kenya. they are not reimbursing for our vehicle storage as they wouldn't ship them. We also are renting our home and need to deduct the utilities.

If you are paying to store personal property while you are overseas for work, that is not tax deductible.  Storing personal goods is not an "ordinary and necessary" expense for your work.

If you are receiving rental income for a home you own, you will report and pay tax on the rental income minus your expenses.  You would need Turbotax Premier or higher if filing online, or Deluxe or higher if using the version installed on your own computer.
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
betsy3
New Member

Federal employee in Kenya. they are not reimbursing for our vehicle storage as they wouldn't ship them. We also are renting our home and need to deduct the utilities.

we own the home and it is in good standing, we had the option to take what they offer or find our own.  This is our first post overseas so we are learning a lot.  They are paying to store all of our household goods, we were told we could write off the vehicle storage and the rental utilities/expenses we pay.  Turbo Tax gives four options to choose from in the Move for Work section.  We are not Military but our move was treated as such for the Gov.  There should be an option for us to add or storage fees and other  expenses from the move.
betsy3
New Member

Federal employee in Kenya. they are not reimbursing for our vehicle storage as they wouldn't ship them. We also are renting our home and need to deduct the utilities.

Foreign Service website

Certain repairs to a leased home,
Education of dependents in special situations,
Motor vehicle shipment,
Separate maintenance for dependents,
Temporary quarters,
Transportation for medical treatment,
Travel, moving, and storage.
Allowances received by foreign service employees for representation expenses are also tax free under the above provisions.
Carl
Level 15

Federal employee in Kenya. they are not reimbursing for our vehicle storage as they wouldn't ship them. We also are renting our home and need to deduct the utilities.

"we own the home and it is in good standing, we had the option to take what they offer or find our own"

I'm not seeing where the above statement fits in to anything. So I'm ignoring it.

Your vehicle and any other excess storage cost being paid out of your pocket just are not tax deductible for the reason cited by Opus_17 above.

For your rental, there's two things I want to point out to you that concern the TT program and your rental. As you are working this through for your first time dealing with a rental.

 - Read every word on every screen *BEFORE* you enter data or make selections. I just can not stress the importance of this, and how it will cost you $$$MONEY$$$ (and lots of it) down the road if you do this wrong in the first year.

 - If while working through the rental stuff, you have questions, then***ASK***. The only stupid question is the one you do not ask. And with that definition, understand that stupid is expensive.

Now I'm not trying to scare you here. You can do this yourself. I've been doing it myself with rentals for over 25 years. So when it comes to mistakes, I've been there, done that, got the T-Shirt *and* paid the piper. Just read all the print, and particularly the small print on all screens. The small print matters, big time for many folks. What follows are some clarify and definitions you will find helpful, will save you time, and hopefully avoid mistakes that could be costly down the road.

Rental Property Dates & Numbers That Matter.

Date of Conversion - If this was your primary residence before, then this date is the day AFTER  you moved out.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. vacant periods between renters count also PROVIDED you did not live in the house for one single day during said period of vacancy.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence or 2nd home, after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.

RENTAL POPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED

Property Improvement.

Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.

To be classified as a property improvement, two criteria must be met:

1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.

2) The improvement must add "real" value to the property. In other words, when  the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.

Cleaning & Maintenance

Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent are not classified as cleaning/maintenance costs. They are instead classified as startup costs, amortized as such and depreciated over time.

Repair

Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent are classified as startup costs, amortized as such and depreciated over time.

Startup Costs

Please note that if residential rental income is not your PRIMARY business, and your PRIMARY source of income, then your rental business is considered to be passive, and you flat out, no way, no how , are not allowed to deduct your startup costs. Period. The IRS says so. See https://www.irs.gov/pub/irs-drop/rr-99-23.pdf and please take note that rental property produces “passive” income, while other types of businesses produce “active” income. Your rental property is not classified as your “active” business, unless you are a real estate professional, an active participant in the management of the property, and it provides a substantial (more than half) amount of your taxable income for the year. All three requirements must be met. There are no exceptions

Start up costs are expenses incurred while preparing the property for rent, with the express purpose being to prepare it for rent, before it is available for rent. These costs do include repair, cleaning and non-recurring maintenance cost. It does NOT include property improvements. With a normal business that produces active income (rental income is passive) you would amortize these costs over 15 years. But you can’t do that with a rental property. However, you can deduct a maximum of $5000 in startup costs in the first year the rental is available for rent, PROVIDED your total startup costs do not exeed $50,000. This is reported on line 18, “Other Expenses” of SCH E, and should be labeled “start up expenses”.

Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.

However, when you do something like convert the garage into a 3rd bedroom for example, making a  2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.


View solution in original post

Dynamic AdsDynamic Ads
Privacy Settings
v