Q & A With America's Real Estate Professor: Bonus Depreciation

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Bonus Depreciation in 2012

Q. What’s the bonus depreciation allowed in 2012 for improvements to real estate properties? Allen, R., New York, NY

A. First, have a licensed tax professional help you with all tax issues. Depreciation is when you buy a capital asset (useful life of more than one year) for a business entity – including real estate rental properties – and you carry the full cost of that item as an asset on your books, and write off a certain percentage per year. So if you did a $30,000 renovation on your kitchen in a rental property, you would divide the full cost by the useful life of improvements – maybe 15 years, and you can write off $2,000 per year against your income – which will save you some money on federal income taxes.

In 2012, to help spur investors buying capital equipment, in hopes of helping the economy, the government had a program of bonus depreciation. What this means is that you can write off a larger amount of depreciation per year than the amount you would calculate over the useful life of the asset. In 2012, it was 50 percent of the cost could be written off in the first year, with the remaining balance deducted over the useful life of the asset. So you might be able to write off $15,000 of that $30,000 kitchen in year one, and $1,000 per year after that.

That will definitely save you some money! So, consult with a tax professional and hopefully you’ll have a little extra coin in the bank after April 15th!

Landlords Inspecting Property

Q. My landlord keeps showing up unannounced with a reason he needs to enter the property. Most of the time it seems he is just looking around and really didn’t have any valid grounds to be there. What are the rules and what should we do to solve this issue. Jennifer C., Los Angeles, CA

A. Landlords have a right to enter your property with reasonable notice, like 24 hours in non-emergency situations, and at any time in an emergency – think fire, flood, etc. Many landlords do want to occasionally inspect their properties and that is reasonable, but unexpected inspections are probably not reasonable unless he thinks some illegal activity or detrimental issue is occurring to the property.

You have rights though, and one of them is “quiet-enjoyment” of the property. That means no surprise inspections or harassment from the landlord.

First, always try and be diplomatic about the situation. Getting into an argument does no one any good. You might want to call him and have a courteous, but frank, conversation about the issue. You could request 24-hours notice, you could request to know how often he plans to inspect, you could ask why he feels it is necessarily to inspect so often. Maybe there are some misunderstandings and you can clear them up.

If that doesn’t work, follow up with a letter, and maybe have an attorney draft that letter. Try to be diplomatic and reasonable, but firm, in what you want.

If that doesn’t work, maybe you should consider moving at the end of your term. It probably doesn’t make sense to get into a fight, and there are lots of smart landlords out there who want good tenants and won’t bother them, because they want to keep their tenants as long as possible. Good luck!

Leonard Baron, MBA, is America’s Real Estate Professor® - his unbiased, neutral and inexpensive “Real Estate Ownership, Investment and Due Diligence 101” textbook teaches real estate owners how to make smart and safe purchase decisions. He is a San Diego State University Lecturer, blogs at Zillow.com, and loves kicking the tires of a good piece of dirt! Email Your Questions to: Leonard@ProfessorBaron.com



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