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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16559
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I am a US citizen living in Canada. I recently purchased an

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I am a US citizen living in Canada. I recently purchased an investment property in the US and am renting it out full time. I made some improvements to the property and purchased new appliances, air conditioner, Hot water heater etc. My regular expenses (tax, insurance, mortgage interest, property management fee and necessary repairs off- set the rental income. I have no other income in the united states. Do I have to depreciate my purchases and the rental property? I know that,when I sell, my capital gain amount will be larger due to any depreciation that I take during the years of ownership. I am a novice in this field. Any advise?

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

Thank you for your question

MyVirtualCPA :

When you have rental property, you must depreciate it

MyVirtualCPA :

If you do not depreciate it, depreciation is imputed at the time of your sale and you will have depreciation recapture whether or not you took depreciation on your tax returns.

MyVirtualCPA :

So, I would take the depreciation. It will add to your passive activity loss. This loss is not gone forever - in the year you dispose of your entire interest in the activity, you will be able to deduct those losses.

Customer:

I understand that I need to depreciate the property, how about purchases to update the property (air conditioner, heater etc.)

MyVirtualCPA :

The air conditioner and heaters are added to the basis in your home and depreciated over the same period.

Customer:

Do I have to disclose a purchase of such items? Or do I disclose it only if I want to claim a deprecation amount? How about blinds or a new fawcett?

MyVirtualCPA :

You would have to disclose the purchase of new HVAC systems, but things like blinds or a new faucet you could deduct those costs as current expenses

Customer:

ok, now I understand. One more question - can I count travel once a year from Canada to Arizona to take care of property as a reasonable travel expense. I manage the propert y myself. How about hotel costs?

MyVirtualCPA :

Yes, if you have a qualified business purpose to be there.

Customer:

thank you, XXXXX XXXXX all for now

MyVirtualCPA :

You're welcome

MyVirtualCPA :

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MyVirtualCPA :

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