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October 3, 2007
Converting to a rental- costs deductible?
If there are costs associated with creating a rental property (we are considering converting the garden floor to a rental), are those costs tax deductible since they are operating expenses?
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Any capital improvements would be depreciated over time which would generally be 27.5 years for residential property. Some particular items would be less e.g. carpeting and appliances (5 years), fencing (15 years).
Posted by: guest at October 4, 2007 4:15 AM
OP here. Thank you!
Does the "no sales tax" rule also apply with capital improvements on rental property?
Posted by: guest at October 4, 2007 7:42 AM
Sales tax is not payable on capital improvements that involve the furnishing of labor and materials for items that become part of the real property. That's the same for your residence or your rental property.
Posted by: guest at October 4, 2007 9:13 AM
You might want to research the tax implications of the conversion. I think (but am not sure) that if you officially change your building's type (from a 1 family to a 2 family) that the city re-assesses your property (higher, of course) and that your taxes might go up significantly.
Posted by: guest at October 4, 2007 10:07 AM
OP here- thank you. We are keeping the building as a 3 family, but we want to rent out the garden which is currently part of the owners duplex, and connect the 2nd floor rental to the owners. So it is a 3fam and will stay a 3 fam. Thank you for the great info!
Posted by: guest at October 4, 2007 1:50 PM
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