No Formal Structure Required… - Posted by Randy (SD)
Posted by Randy (SD) on July 02, 2005 at 09:26:36:
The IRS position on “deductible business expenses” is you must only have the “intent” to make a profit for the expense to be deductible. Utilizing a legal entity such as a LLC or land trust is always beneficial but not required, I would not suggest co-mingling real estate investment expenses with your other business. I made the following post around January of this year regarding business deductions.
The list would stun a team of oxen:
The list of legitimate tax deductions for real estate investors is literally mind blowing! For starters go to www.IRS.gov and look for the following IRS publications:
IRS publications 527 - rental property
IRS publication 587 - business use of your home
IRS publication 544 - sales and disposition of assets
and IRS publication 946 - How to depreciate property
These are all Adobe PDF files, they’re all free and relatively easy to understand. The second phase of your tax savings strategy should be to have a financial accounting software such as MS money or Quicken or QuickBooks, enter every dollar spent into Quicken (I personally use Quicken and recommend it) when I suggest entering every dollar spent, I literally mean if you go to Kinko’s for a 49 cent copy… put it in there. I use a portion of my primary residence as my “home office” IRS publication 587 tells me I can legitimately deduct 35% (based on square footage used for business purposes) of my total housing expenses, all utilities, lawn care, snow removal etc. etc. additionally computers, fax machines, printers, digital cameras etc. are all depreciated for business reasons. My uncle lets me right off my Internet access, cell phones, land line telephone, depreciation on my second business vehicle, mileage… Are you getting the picture here? The point is you need to to have a way to track what those expenses are and easily incorporate them into your tax return. And added benefit of using Quicken or QuickBooks is TurboTax will automatically import all of your financial information directly to the appropriate schedules on your tax return. And I haven’t even touched on legitimate real estate related deductions such as cost of sales, closing costs, rehab expenses, depreciation of rental property. So get busy read the forms buy some software and have fun.