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Video instructions and help with filling out and completing Where Form 4797 Reduced

Instructions and Help about Where Form 4797 Reduced

Then I purchased a rental 38 k + 18 K for repairs when I sell the rental should the cost basis be the home oh I'm sorry should the cost basis of the home be 38 K or the cost plus repair and and I think we sometimes have differing opinions on this I'm kind of the opinion that if you buy a house on the cheap for $38,000 that with some improvements could be worth a lot more you're probably doing Capital One's capitalizable expenses so what Jeff is saying is there's two types of things of work you do on your house one adds to its useful life the other one is just to fix something right though it's repair versus renovation if you spent eighteen thousand dollars that does not sound like a repair that sounds like a renovation and you would add that to your basis so the cost basis would be increased if you are repairing something like a something was broken and you're just fixing it and you're not adding to the useful life of the actual property so like you're fixing a driveway or you're fixing the door those you wouldn't add to the basis you'd write those off immediately right and here's the trick there's a safe harbor that says if the invoice is less than $2,500 you can write it off absolutely and they can question it if it's I think it's up to 5,000 we were just talking about that where you have to get some sort of audited financial but right but but I'm not gonna go that route I'm just gonna say if it's less than 2500 so if you have somebody fixing up on your house have them make sure that they invoice you less than 2500 you treat it as a repair and write it off now versus spreading it out over twenty seven and a half years somebody asks this by the way they asked about cost segregation and the rule on that is on a typical house like on this house fifty six thousand let's say it was all renovation they didn't repair anything they they they basically fix this house up replaced it's raw it's floors and everything typically you'd be running that off over 27 and a half years what cost segregation says is hey I can break out the carpeting I can break out the ceiling fans the lights the light switches and I can write those off immediately and it's basically taking the the improvement and breaking it into pieces but that usually gets you as an extra 20% to 30% on the first year right so on a house like this you could do a cost sag if it's 56 you're probably gonna get an extra $10,000 write-off or you use the safe harbor and get the same thing without having to a cos seg by making sure that they're inviting you less and some of them I think a lot of people don't understand about the cost segregation is yes it does decrease contra crease your income dramatically in that first year but in later years we're gonna have slightly higher income yeah and then somebody says is the property have to be in service to get the 2500 now this repair I mean it has my D it has to be something that you're using as an investment property so it's not your home because we know a lot of the repairs happened in between tenants and things of that nature when it's not being occupied but it's still available for rent I mean you are looking for somebody but you're just for repairs in between somebody asked California taxes worldwide and they're in debt yes there's this thing when you spend more than you make doesn't matter how much you make you're still going backwards it's like I lose money on every unit but I'll make it up in volume we'd never say they use their money wisely yeah Music.

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