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We purchased land in utah and heavy equipment in 2017 with…

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We purchased land in...

We purchased land in utah and heavy equipment in 2017 with the intention to start a business. We took out a home equity loan to purchase the land where we'll store the equipment. We haven't started the LLC yet so don't have a tax ID number. Can we write off these expenses in our 2017 or 2018 taxes?

Submitted: 4 months ago.Category: Tax
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3/17/2018
Tax Professional: Lev, Tax Advisor replied 4 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,122
Experience: Taxes, Immigration, Labor Relations
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Unfortunately - the fact of purchasing is NOT the factor in determination when to start deduction.

The land purchase cost is capitalized and not deducted until you eventually will sell the land.

You may start depreciation equipment when it in placed in service - means after your business started - regardless if you have an LLC and regardless if you have a separate tax ID for your LLC.

But if the business is not yet started - no deductions are allowed on any capitalized expenses.

If you do any land improvements - these costs are also capitalized - and you may deduct via depreciation when you start the business.

Sorry if you are expected differently.

Let me know if you already started any business operations?

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Customer reply replied 4 months ago
If we get the LLC, although I have no idea how long it takes, in the next couple months can we deduct the cost of the equipment at any point in time
Tax Professional: Lev, Tax Advisor replied 4 months ago

ONLY if you start business operations ... regardless if you have an LLC or not...

The key principle to start deducting business expenses is to START business.

The business is considered to be started if you have a product or service for sale.

You might not have any actual sale yet - as long as you start offering and are ready to sell - the business will be considered as started.

If you had ANY actual sale - that is a good evidence that your business started.

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Customer reply replied 4 months ago
We did some snow removal last year for a fee. Would that count?
Customer reply replied 4 months ago
Also we rented out some equipment.
Tax Professional: Lev, Tax Advisor replied 4 months ago

If you started renting activity - that is reported separately.

You will deduct corresponding expenses for THAT activity.

You will deduct depreciation for the equipment which was placed for rental - that is considered as placed for service.

You will be able to deduct related expenses against your rental income.

If you paid for snow removal - and that is related to rental activity - that cost may be deducted as well.

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Tax Professional: Lev, Tax Advisor replied 3 months ago

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If you still have any doubts, need clarification - please be sure to ask.

I am here to help you with all Social Security / Tax related issues.

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