I’m a landlord. Can I deduct these expenses?

By Karin Price Mueller | NJMoneyHelp.com for NJ.com



Q. Suppose the sole beneficiary of an IRA on the date of inheritance is categorized as a “non-eligible beneficiary” for the stretch provision, yet becomes disabled or chronically ill during the ten-year payout period. Do they then become eligible for the stretch payout of undistributed funds?


— Curious


A. Yours is a great question.


The SECURE Act — Setting Every Community Up for Retirement Enhancement of 2019 — changed the way inherited IRA accounts are treated.


The change requires most non-spouse beneficiaries to withdraw all the funds in the inherited IRA over a 10-year period, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.


“The withdrawals do not have to be done each year,” he said. “You can wait until the last day of the 10-year period and then withdraw all the funds at once. The change applies to both regular IRAs and Roth IRAs as well.”


There are five exceptions to the 10-year rule: a surviving spouse, a minor child (note the 10-year rule applies once the minor reaches the age of majority which is usually age 18), a disabled individual, a chronically ill individual or an individual who is not more than 10 years younger than the deceased participant or IRA owner.


But it seems those statuses must be at the time of the IRA owner’s death, though the SECURE Act is silent on the matter.


Email your questions to Ask@NJMoneyHelp.com.


Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.

Q. I own a new rental property. I posted an ad on Sept. 21, 2020 and got the certificate of occupancy on Oct. 23. My tenant signed a lease for Nov. 7. Which date is my “available for rent” date so I can determine whether repair costs to prepare the house are deductible or if they are considered start-up costs and subject to the $5,000 cap?


— Landlord


A. Congrats on becoming a landlord.


Expenses incurred starting a business are usually non-deductible.


However, there is an exception when you start a real estate rental business, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.


He said when you start a rental business, you can deduct up to $5,000 of start-up expenses.


“Start-up expenses are costs of investigating what it takes to properly run a rental business, property maintenance costs, insurance premiums, the cost to set up the business including costs to form an LLC, and so on,” he said.


You asked when the start-up period ends and the rental period begins.


“This cut off is when the property is available for rent and not when the tenant moves in,” Kiely said. “In your situation, you cannot rent the property until you receive the certificate of occupancy, so, I would say your property was available on October 23.


Email your questions to Ask@NJMoneyHelp.com.

Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.

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