JC Leahy, MA Accounting
For my friend Joe:
Capital vs Expense
Not all outlays for an investment property are expenses. Outlays to
acquire, renovate, or extend the useful life of
an investment property must be capitalized. Those outlays add to the
tax basis of the property and will ultimately reduce any capital gain when
you sell it. On the other hand, ordinary and necessary expenses to
hold, operate and maintain an investment property are deductible investment expenses.
How To Report Investment Expenses
To deduct your investment expenses, you must itemize deductions on Schedule A (Form 1040). Enter your deductible investment
interest expense on Schedule A (Form1040), line 14. Include any deductible short sale expenses. Also attach a completed Form 4952 if you used that form to
figure your investment
interest expense. Enter the total amount of your other investment expenses
(other than interest expenses) on Schedule A (Form 1040), line 23.
List the type and amount of each expense on the dotted lines
next to line 23. (If necessary, you can show the required information
on an attached statement.)
When To Report Investment Expenses
If you use the cash method to report income and expenses,
you generally deduct your expenses, except for certain prepaid interest,
in the year you pay them. If you use an accrual method, you generally deduct your expenses when you incur a liability for them, rather than when you
pay them.
FOR MORE INFORMATION, SEE MY EARLIER ARTICLE ON INVESTMENT EXPENSES !!!
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