Tax related question

[grumpymcdorky18 7]

Hello everyone,

My name is Barnabas (using my baby's account) and I live in US, while my baby fiance lives in the Philippines.

So, I'm doing my taxes this year (I filed for an extenstion), and I know that I need to make 125% above the poverty level. My income was just below that (18,110).

So, I was filing on TurboTax and I wanted to add in some rental income that I had received from renting a spare room out of my home. However, when I was filing on TurboTax, they asked me about various deductions I could claim for depreciation, repairs and maintenance to my property. After adding everything up, it seems like I spent more money maintaining and repairing the house then I made in Rental income.

Therefore, 2 things happened.

1. My refund went up to a decent amount

2. My AGI (Adjusted Gross Income) went down to $15,000 something.

So, obviously I was happy about getting extra on my return, but I'm afraid the lower AGI will be viewed negatively by the people processing my claim when they decide to look at my income, even though my actual income was $18,000ish.

So I have a few questions.

1. Should I definitely find a way to boost my income for 2010 (through rental or whatever) to increase my chances at getting approved. I don't know if 18,110 is close enough, or I should definitely be above the minimum, 18,330 or whatever...

2. Should I exclude the deductions for my rental property so my AGI on my Tax forms stays at 18,000 +? I'm assuming that I should, but I just want to confirm that.

Also, even though I have my forms almost completed on TurboTax, and my refund will barely be anything after paying TurboTax, I'm wondering if I should just take my stuff to a Tax Attorney and spend a bit more to have them prepare it and make sure it's done properly, since this could be one of the most important tax filings I'll ever do!!

[Jojo92122 1,925]

The IRS presumes that you will take the depreciation on your rental property even if you don't take it. When you sell the property, you pay taxes on the depreciation through depreciation recapture. If you don't take the depreciation, you will end up paying more taxes than you are legally required to because of depreciation recapture.

Turbotax is good for the simple tax returns or people with a basic background in tax laws.

For someone like you who seems lost in the tax world, -- (Lots of us are lost in somethings. All I know about cars is putting gas in them.) --, it may be better to go to a good CPA who will charge your a few hundred to do your taxes correctly.

Jojo92122 "I get pay to professionally do others' tax returns, and I am better than TurboTax"

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http://taxes.about.com/od/capitalgains/qt/recapture.htm

Tax Planning Tips for Depreciation Recapture

When a rental property is sold, any passive activity losses that were not deductible in previous years become deductible in full. This can help offset the tax bite of the depreciation recapture tax.

Also, rental properties can be sold as part of a like-kind exchange to defer both capital gains and depreciation recapture taxes.

There's one tax strategy, however, that will not help. Since depreciation is recaptured when the asset is sold, it is reasonable that some people would avoid claiming depreciation as a strategy to avoid the recapture tax. This strategy does not work, because the tax law requires depreciation recapture to be calculated on depreciation that was "allowed or allowable" (Internal Revenue Code section 1250(b)(3)). From a tax planning perspective, taxpayers should claim depreciation on their property to get a current tax deduction, since they will have to pay tax on the gain due to the depreciation.

Edited April 20, 2011 by Jojo92122

[damulag 26]

Since this is a room rental in your current home in which you also live you will not be able to deduct all the expenses for the entire house. I believe turbo tax assumes the entire rental income is from a seperattly owned rental not your primary residence. You might be alble to just claim the income from the room rental as additional income and pay the tax on it without any deductions.

[hoody 8]

hi I am doing something similar with mine i rent out two rooms in a house that I rent for more than the total cost of the house to rent. I also filed for an extension on my taxes. I dont know what to tell u but I am interested in any answers u may receive because this will help me too. Good luck on ur visa man!