Discussion:Business Expenses
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> Business Expenses
| 15 January 2007 | |
| Hi,
I own a business that grew enough for me to expand in 2006 so we purchased a new building and did a large amount of renovating, including interior work (offices) and landscaping (driveway work to accomodate large trucks). My question is how much of this can I write off? Is it based over time with depreciation? I show my gross expenses as $672,000 and roughly 50% of that is due to the new building expenses but my accountant claims we can only claim a very small portion of that. For example, the cost of the building alone was $57,000 and he said we can only claim roughly $1500 of that. Can someone shed some light on this? I am a LLC business in Michigan. Thanks Cuz | |
| January 15, 2007 | |
| First, glad to see that you're an LLC. Always a concern with RE inside a corp. Second, it doesn't matter what type of entity you are, all capital improvements are depreciated out over a very long time! The land improvements are in one class, the building another...and without looking at the charts, about 3% per year you can figure, so his numbers seem on. Sorry. | |
| 15 January 2007 | |
| Cuz, you should break out the Sec 1245 Property from the 1250 Property or if you would rather pay somebody to do that for you then get a Cost Segregation Study. | |
| 15 January 2007 | |
| Ouch, that hurts!
Its bad enough that I barley made profits last year due to the extra expenses. Now I will show even higher profits, even though their not really profits because they were invested into the building instead of my pocket. With the costs for the related upgrades on the new building, there's no way those costs added that much value to the building... Just doesnt compute. PVVCPA, I will forward the info to my accountant Thanks again Cuz | |
| 15 January 2007 | |
| If it did not add much value to the building, why did he spend over $300,000 of his money? | |
| 15 January 2007 | |
| I'm sure it added value but I'm also sure it didnt add 100% of what was invested. It was also the only biulding in this area.
Is it possible, and/or would I benifit if I had purchased the building myself and charged the business rent? I remember a local business owner that owned everything, includng the building and all the equipment and he charged the business rent on everything. Thanks again Cuz | |
| 15 January 2007 | |
| Is your LLC a single-member LLC? If so you can't charge rent to yourself.
| |
| January 15, 2007 | |
| Agree, DZ. Over $300,000 of building expenses sounds like capital improvements to me. Cuz, PVV is correct, also. If any of the expenses were for equipment, you might be able to expense them under Sec. 179. | |
Death&Taxes (talk|edits) said: | 15 January 2007 |
| I read something there that sounded like land improvements with a shorter life. RIA sent me a book on approval about Cost Segregation Studies. While this is not my field, you might ask your accountant or others the cost of such. The idea is to separate 5 year wheat from 39.5 year chaff in terms of life. To be honest, either you did not let your accountant know what was going on, or he was not pro-active enough to get on top of this project and make this suggestions to you. | |
| January 15, 2007 | |
| Good point, D&T. Land Improvements - 15 year depreciation | |
| 15 January 2007 | |
| Thats my whole problem, I live in a very rural area and have already gone through 3 different accountants in the past 4 years. Each one saying the previous one didnt do something right, causing me to dig through all our files again and again and waisting hundreds of hours of my time. The lastest one is one of the largest in our area but still seems green when it comes to a volume product wholesale distribution business.
| |
