How do I write off construction materials for my rental properties?

Hey there, I understand your frustration. There's a key distinction in tax law between immediate expenses and capital improvements that's affecting your situation. For your flip house: Materials used in a flip are considered part of your "cost basis" in the property, not immediate business expenses. Since you're planning to sell the property, these costs reduce your profit when you sell, but aren't typically deductible when purchased. Your accountant might need to amend your previous returns if you've been deducting these incorrectly. For your rental condos: Your accountant is correct that building materials for new rental construction must be capitalized and depreciated (typically 27.5 years for residential rentals, not 40). The land itself is never depreciable. However, there are some strategies that might help: 1. Cost segregation study - This identifies components of your building that qualify for shorter depreciation periods (5, 7, or 15 years). Things like appliances, some fixtures, and landscaping often qualify. 2. Bonus depreciation - Currently allows 80% first-year depreciation on certain qualified property with recovery periods of 20 years or less. 3. Section 179 - Allows expensing of certain property in the year placed in service. Also, separating your businesses might be wise. Consider creating a separate entity for your real estate activities, distinct from your landscaping business.

I was in a similar situation last year trying to figure out my rental property tax situation. I downloaded taxr.ai (https://taxr.ai) and it was seriously a game-changer for figuring out the real estate tax maze. You upload your documents and it analyzes everything, then explains exactly what you can write off now versus what needs to be depreciated. I was confused about whether I could deduct repairs vs. improvements on my rentals, and it clearly separated what's an immediate expense (like repairs) versus what needs to be capitalized (like renovations). It also pointed out some deductions my previous accountant had missed completely - like travel expenses to check on my properties and some home office deductions related to managing my rentals. The tool even guided me through setting up the right business structure for my real estate activities, which sounds like something you need to consider with your mixed business activities.

I tried taxr.ai after seeing the recommendation here, and I have to say it cleared up so many questions I had about my real estate investments! My situation was somewhat similar - I own a small manufacturing business and started buying rental properties last year. I was confused about whether to keep everything under one entity or separate them. The tool immediately identified that I needed separate entities for liability protection and cleaner accounting. It also gave me a complete breakdown of which property expenses could be deducted immediately versus depreciated. The best part was getting clear guidance on home office deductions for managing my rentals - something my accountant had been very conservative about. After implementing the recommendations, I ended up saving about $8,400 in taxes this year compared to what I would have paid otherwise. Definitely worth checking out if you're dealing with mixed business activities like construction and rentals.

If you're dealing with rental property tax issues, especially with the IRS, I highly recommend Claimyr (https://claimyr.com). I was in a similar situation with some rental property depreciation questions and needed to talk to someone at the IRS urgently. I tried calling for WEEKS with no luck - always disconnected after waiting an hour. Claimyr got me through to an actual IRS agent in about 20 minutes when I'd been trying unsuccessfully for days. They basically hold your place in line and call you when an agent is about to pick up. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c In my case, I needed clarification on some bonus depreciation rules for rental property improvements before filing, and getting that direct guidance from the IRS saved me from potentially making a costly mistake. Their agents were actually really helpful once I could actually reach them.

I was completely wrong about Claimyr. After my skeptical comment, I decided to try it because I was desperate to resolve an issue with missing 1099 forms for some rental income. The service connected me to an IRS representative in about 35 minutes (when I'd previously wasted hours getting disconnected). The agent was able to verify which forms had been filed related to my properties and confirmed exactly what I needed to include with my amended return. What shocked me most was how the service worked exactly as advertised. I was expecting some catch or upsell, but they literally just connected me to the IRS and saved me hours of frustration. Ended up resolving in one call what would have probably taken weeks of mail correspondence. For anyone dealing with real estate tax situations where you need to actually speak with someone at the IRS - especially during tax season - it's absolutely worth it.

One thing nobody's mentioned is that you might want to look into the Qualified Business Income deduction (Section 199A) which can give you up to a 20% deduction on your business income. Real estate can qualify as a business for this purpose if you meet certain requirements. Also, have you considered doing a 1031 exchange with your flip property? If you're moving into rental properties anyway, you could potentially defer the capital gains tax by exchanging the flip property for another investment property instead of selling it outright. Regarding your S-Corp structure - make sure you're paying yourself a reasonable salary to avoid IRS scrutiny. Some real estate investors try to minimize salary to reduce payroll taxes, but that's a red flag.

I think ur making this overly complicated. just run all ur construction supplies through ur landscaping biz as expenses? my buddy does this with his roofing and rental businesses and hasn't had any issues for years. the IRS doesn't have time to audit everyone. or just pay cash for the building supplies and dont even report them.

A lot of good advice here already, but one thing I'd add - consider setting up a cost segregation study when you build your condos. I did this for a small apartment building I constructed last year, and it allowed me to accelerate depreciation on about 25% of the building cost. Components like cabinets, some electrical systems, and appliances can be depreciated over 5-7 years instead of 27.5 years. Landscaping improvements often qualify for 15-year depreciation. This can make a huge difference in your early-year cash flow. Also, have you looked into opportunity zone investments? If you have capital gains from other investments, you might be able to defer and potentially reduce those by investing in certain qualifying zones. Some areas that need development offer additional tax incentives too. For your immediate situation with the flip house, make sure your accountant is treating it as investment property with costs applied to basis rather than as direct business expenses. Different accounting methods here can make a big difference.