Fellas,I sold my building my shop was in and reset up at home which has a detached garage on which I put an addition on to resume business. Heres the deal- hours of sweat equity and 45 k in material to reset the shop. Can I get away without capital gains tax or less? Or is this a capital improvement? Any loop holes? Any other deductions you guys know of? p.s.
Thanks for the help, Lou
Look closely at these common locations for hazardous materials in older homes.
"I have learned so much thanks to the searchable articles on the FHB website. I can confidently say that I expect to be a life-long subscriber." - M.K.
Dig into cutting-edge approaches and decades of proven solutions with total access to our experts and tradespeople.
Start Free Trial NowGet instant access to the latest developments in green building, research, and reports from the field.
Start Free Trial Now
Replies
I'm going to guess no but don't send the check in till you hear from the others.
Caution: Moving forward, if you take the depreciation for your home shop, you'll lose the ability to take the homeowners tax exemption on that part of the property. It's okay to expense the utilities for the shop but if you get into depreciating it, you might end up with a higher tax bill in the long run.
Don't take my advice as anything more than a guess. Consider it heresay.
Bob's next test date: 12/10/07
This can be a tricky area.
At the least look at the IRS pubs and/or get one of the "telepone book" sized tax books such as Lazsers.
The IRS has a number of publications on depreciation and cost basis and selling of property that would give you some infomration.
But I sugest some consulting with a tax pro.
And there may be a buch of options such as how the business is structured. If it is an LLC or Corp it might be best to lease the shop to the business enity.
But I suspect that most of this was done before 08 so you have limited options.
But first of all anyhing that is not part of the structure it'self, but are capital expenses (such as new cabinets or work benches) can be section 179 expensed.
I don't know about capital improvements to structure as to whether it can be written off on sec 179 or not. But even if it can then you you are limited by the profit on the buisness. This all assumes a sch C return.
Otherwise it needs to be depreciated. For structures it is a long time (27.5 for residential rental, but off hand I don't know for non-residential).
And there is some truth to what Jim says about capital gains for residents. but again I believe that there are some limitation on separate structures whether they are used for business purpose or not.
.
A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
And by "tax pro" you maybe should emphasize that doesn't include the seasonal help used at H&R Block or other rapid tax preparers. This sounds like work for a CPA with a lot of business tax experience..
.
"Thank goodness for the Democrats! If you are terminally unemployable, enjoy living off of govt welfare and feel you owe society nothing you're in luck: there is a donkey waiting for you."
Not neccesarly a CPA.An enrolled agent it also good.Many accounts are enrolled agents. The manything that they are accessable all year.And business taxes is too wide.I would look for some one that does SMALL business and rentals. And does SP and not just Corp, multistate, etc.But the telling thing is that the person should be able to give some basic, but generic answers, in a way that he can understand, in 30 mintues without keep repeating that he needs to look that up.By this I am not talking about giving Lou enough information to finish his own taxes. But talk about the basic options.And with a sistuation like this I would expect him to spend 15 minutes ot 30 minutes asking questions of Lou to get the basic background before starting to answer..
.
A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
Good points..
.
"Thank goodness for the Democrats! If you are terminally unemployable, enjoy living off of govt welfare and feel you owe society nothing you're in luck: there is a donkey waiting for you."
Here's my guess: The shop you sold is subject to capital gains no matter what you've done with that gain. That you spent it on another business use makes no difference to that capital gain. You can write off the $45K on shop improvements made to your residence if that is a legitimate business expense. Can you do the entire portion.....??? Do you have to depreciate it? Probably, since it's real property, not tools.
The very best advice: Hire a cpa. Years ago as a stubborn young man, I always did my own tax return. Then two things happened, I built a commercial building for my business and I sold some property (capital gain time here) where I carried the note. I didn't know what to do for the return. Oh, I could have guessed, but I would have guessed wrong..... at least wrong enough to not be to my best advantage. So I got a cpa. He has saved me his fee in a lesser tax bill every year since. I know this because I still always do an estimate myself. The sleep I get at night in April is also better.
The taxes on old business are set. Recapture depreciation at 25% and the rest is at capital gains rates of 15%.
New property can be depreciated as a business building.
You get out of life what you put into it......minus taxes.
Marv
You only pay capital gains when you sell.
He did sell..
.
A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
A good accountant is worth his weight in dollar bills
Welcome to the
Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!
I paid the 15%, Should have borrowed the money to redo the shop and spent the money on rental property.
Live and learn-
-Lou
think long and hard if you really want to set part of your home up as residental/bussiness use.it will cost you down the road,because that part will be subject to tax. i know,i've got a tshirt from that party.larry
if a man speaks in the forest,and there's not a woman to hear him,is he still wrong?