Tax deductible?

[RNeumann]

This post and your example is hard to follow. You can depreciate you lawn mower if you mow the grass over there. You can have a depreciation expense that will decrease your taxable income. If you use the lawn mower 100% on the rental business you can depreciate it according to the schedule set forth by the IRS, if you split the use of the lawn mower between your personal home or non business property you can depreciate a portion of it.

The IRS doesn’t typically allow rentals to be a “business.” That’s a “loophole” that has been “closed” for a long time.
OP needs to answer that question first. Try googling “Passive Loss Limits”

 

[randy41]

The IRS doesn’t typically allow rentals to be a “business.” That’s a “loophole” that has been “closed” for a long time.
OP needs to answer that question first. Try googling “Passive Loss Limits”

what happened to the part of the law that allows up to 25k in real estate losses if you actively participate?

 

[Old Red]

The IRS doesn’t typically allow rentals to be a “business.” That’s a “loophole” that has been “closed” for a long time.
OP needs to answer that question first. Try googling “Passive Loss Limits”

The original post was concerning deducting his tractor payments against his income of his rentals. As I stated before, you cannot deduct the tractor payment from the taxable income, but you can deduct the interest expense and he can depreciate the BX. If he uses his BX at home and at his rental units he can depreciate a portion of his BX. It is not difficult to do.

I am still not sure I understand your original post and follow up post as it pertains to this thread.

 

[Old Red]

You would have to be set up as a corporation/LLC and any durable goods have to be depreciated over 10 years. If you're splitting between personal use and business, that gets a bit more muddy. A home office deduction is easily measured, but the percentage of us of a piece of machinery is different. Having the corporation PRIOR to the purchase would have been easier than trying to end run around the taxes.

You do not have to be set up as a corporation/LLC to depreciate assets....depreciation schedules differ for different assets and not everything is 10 years. It does not "muddy things" splitting between personal use and business. No offense guys, but wow....some of these answers......I owned a tax preparation business I purchased from my brother. I owned this business for 4 years and processed over 600 tax returns a year.....I am by no means an expert but the original poster asked a very easy question to answer.

 

[RNeumann]

The original post was concerning deducting his tractor payments against his income of his rentals. As I stated before, you cannot deduct the tractor payment from the taxable income, but you can deduct the interest expense and he can depreciate the BX. If he uses his BX at home and at his rental units he can depreciate a portion of his BX. It is not difficult to do.

I am still not sure I understand your original post and follow up post as it pertains to this thread.

Probably need to reread the OPs post. He asked if it’s deductible- not if it’s deductible against just his property. Basically you can’t show a loss on your property to offset other non property income.

With regards to “actively manage.” Most don’t qualify for that. I believe (don’t quote me) that to actively manage you need to spend 750hrs/year on the property. Most don’t come close to that. Again, google passive loss limits.....and now “actively manage” with regards to the IRS and property ownership.

So again, an LLC or business isn’t what the OP has. All he has is a few properties. It would be difficult to prove he actively manages them. And if he can’t, the panacea of write-offs isn’t there.

Like I said in my first post, we have 3 rentals just like the OP. We also did a
lot of work on them- just like the OP. We’ve been down this road.

 

[Tractor Seabee]

This is why I have an accountant.

Ron

 

[check]

It is difficult to be a “professional” property owner/manager in the eyes of the feds- most don’t qualify. If you don’t qualify you can only write off against gains on the property. So as an example you make $100,000 a year building houses (or selling cheese burgers....whatever you do) and lose $25,000 with the 3 rentals you are taxed on $100,000. We too own 3 rentals and have had work done to them. The write off is minimal. The main reason to keep track of all your costs is to offset gains when selling the property.

Wow, that is indeed a bummer. Here in Canada any rental losses can be deducted against your other income.

 

[Old Red]

Probably need to reread the OPs post. He asked if it’s deductible- not if it’s deductible against just his property. Basically you can’t show a loss on your property to offset other non property income.

With regards to “actively manage.” Most don’t qualify for that. I believe (don’t quote me) that to actively manage you need to spend 750hrs/year on the property. Most don’t come close to that. Again, google passive loss limits.....and now “actively manage” with regards to the IRS and property ownership.

So again, an LLC or business isn’t what the OP has. All he has is a few properties. It would be difficult to prove he actively manages them. And if he can’t, the panacea of write-offs isn’t there.

Like I said in my first post, we have 3 rentals just like the OP. We also did a
lot of work on them- just like the OP. We’ve been down this road.

Goodness....he doesn't have to prove that he "actively manages" his property. He simply asked "can he deduct his tractor payments"....the answer is no, not directly because that is not how the IRS allows you to deduct capital expenditures on business income, but he can depreciate his tractor and deduct any interest expense from the income he makes on his property. Which is just as good as or better than just deducting tractor payments depending upon his situation.

It sounds like whatever advice you are trying to offer here is a completely different scenario than what he is asking. It sounds like you were trying to deduct some of your personal time off your taxable income....meaning saying that you should be able to deduct $50 per hour while operating that tractor, or mowing grass....this IS NOT what he is asking....and that is the only logical conclusion I can come up with in what advice or what you are saying.....this is what bothers me sometimes with people's responses on forums.....

And yes, tractor seabee hit the nail on the head......DO NOT get your tax advice on this forum, please consult a tax prep office, accountant, or read the IRS publications.

 

[randy41]

here are the rules for active participation...
Active participation depends on all the facts and circumstances. Factors that indicate active participation include making decisions involving the operation or management of the activity, performing services for the activity, and hiring and discharging employees. Factors that indicate a lack of active participation include lack of control in managing and operating the activity, having authority only to discharge the manager of the activity, and having a manager of the activity who is an independent contractor rather than an employee.
copied and pasted from the irs publication.