Algorithm to distinguish rental property categories (repairs, maintenance, supplies, travel)

I'd say fertilizer is line 15 Supplies. Hiring someone to do the gardening using your supplies would be Line 7 Cleaning and maintenance. Then again, if you did the gardening and cleaning yourself and put the cost of the supplies in Line 7 it wouldn't be a big deal. It doesn't make a difference to your total tax. Line 21 Total expenses is the same either way.

One thing you have to distinguish between are repairs and capital improvements. A repair is painting your house (paint would be supplies, though if you hire a company to do it they would likely give just one big bill and so you would put the whole thing -- repairs and paint itself -- into the repairs line). A capital improvement is an enhancement/improvement to the house, not just bringing and old thing back to working order. Capital improvements must be depreciated over a period of time, and you cannot take a section 179 depreciation deduction (writing off the asset all at once as if it were an expense which you can normally do under certain circumstances) or bonus depreciation (where you write off 50% of the asset now and depreciate the rest over a period of years). Also, when you sell the house or the asset, you have to recapture depreciation on the asset, which means you'll likely have to pay some tax for selling the asset at a cost above $0. Each asset you buy has a different class life, ie. is depreciated over a different number of years.

The typical example is adding a new deck. That's a capital improvement. Installing a fridge, A/C, water heater, stove, etc when you didn't have one before is a capital improvement. But there are gray lines. If you're replacing your water heater with a new model that is more efficient or a different type of heater such as a solar heater, this may also be a capital improvement. I'm no expert here. As pretty much all appliances today are more efficient than they were

5 years ago, this would suggest replacing anything is a capital improvement. Also, it seems you should get a deduction for the disposal of the old item, but in order to do this you should have depreciated it as a separate line item.

Schedule E does not have a line for meals and entertainment. But if you took a rental client out for lunch, or were buying meals for yourself while working and traveling away from home, meals would be deductible. You may add it to Line 18 Other, but be prepared to justify your position to the IRS if they ask. Only 50% of the meal cost is deductible.

As this is your first year as a landlord, see a professional. Ask them for line items for the rental part of your tax return and the personal part. The rental part is deductible on Line 10 Legal and other professional fees. The personal part is deductible on Schedule A, but it has limitations and for most people it is really not deductible at all.

Supplies.

Supplies are physical, consumable things, typically costing less than a few hundred bucks and/or lasting less than a year. Cleaning/maintenance would tend to be more of a labor or service expense, for example mowing, pruning and sweeping. A rake or broom would be a supply. A lawn mower would be a capital asset.

Repair. You are putting a broken asset back to its normal operating condition, just like replacing a broken glass pane in a window. Repairs need to be distinguished from complete removal and replacement of a worn-out asset, such as a hot water heater.

You can search various on-line archives of this group for lengthy discussions about how to treat roof, carpet, painting, and hot water heaters in rental activities.

Meal expense on travel outside your tax home for business purposes might be 50% deductible, it depends on additional facts and circumstances surrounding your trip.

Hire a professional if you find you are spending too much time trying to figure out what line of Schedule E to put things on. You might also find valuable help from a professional on topics of considerably more importance, like depreciation, passive activity income/loss, conversion from personal to rental property, and tax planning for eventual disposition of the property.

On 2011/08/14 09:48, snipped-for-privacy@yahoo.com wrote: Capital improvements must be depreciated over

Wait, what? Are you saying there's no bonus depreciation for rental assets such as refrigerators and stoves?

In other words, have the tax preparation invoice break out (by tax form/worksheet or some other reasonable method) the portion of the fee for personal vs. business/rental.

Maybe I could be wrong. Publication 527 explicitly says there is no

179 deduction on stuff used in a rental, but they don't say anything about bonus depreciation.