Depreciation

[Breakfast Diva]

The part the worries me is the gotcha of having to pay back any depreciation when I sell..........

The part the worries me is the gotcha of having to pay back any depreciation when I sell.........

This is why we all want to die with our boots on...
.

You can always do a 1031 exchange for another investment property. Say I sell for $1.5 million and my property has been fully depreciated. I can turn around and buy an investment property which is "like kind - meaning investment/rentable" (or 2 or 3) that total the $1.5 million and not have to pay any taxes on it so long as I keep those properties for two years. So I could buy 3 $500,000 condos at the beach and rent them out. After 2 years, I could move into one of them and keep getting income from the other two.
That's why they won't have to take me out in a box.
.

MtnKeeper is correct, as was the initial "question." (My husband is an attorney.) IF you are just setting up your B&B consider a couple of things:
1) can't deduct parts of inn you use, even for 5 sec. - so cannot deducts/depreciate hall\ways, DR, kitchen (unless you have two), etc. We have a party room/office on a separate meter for power. THAT is 100% depreciated/deducted. Only about 2/3 of the rest of the inn (historic part) can be.
2) Less you depreciate less you have to "pay back" so a balance is a good idea. Less deduction now can be better later.
3) IRS used to really go after innkeepers overdoing it (on deductions and other things) so do it by the book
4) always seek the counsel of a CPA.
5) we've used the like kind exchange to go from a duplex (sold) to vacant land. The categories are pretty broad. Get an attorney or CPA to help you. You also need a specific company which handles the transfer (for a fee).
As we just told a friend who inherited $1 million from her parents recently: Lots to know, lots to learn and lots of responsibility when you actually have money. Much easier being poor, LOL!
.

1) can't deduct parts of inn you use, even for 5 sec. - so cannot deducts/depreciate hall\ways, DR, kitchen (unless you have two), etc. We have a party room/office on a separate meter for power. THAT is 100% depreciated/deducted. Only about 2/3 of the rest of the inn (historic part) can be.

We have an entirely separate living quarters including its own kitchen. This is our private non-business space. Everything else is 100% there as our business and is completely deductible.
.

1) can't deduct parts of inn you use, even for 5 sec. - so cannot deducts/depreciate hall\ways, DR, kitchen (unless you have two), etc. We have a party room/office on a separate meter for power. THAT is 100% depreciated/deducted. Only about 2/3 of the rest of the inn (historic part) can be.

We have an entirely separate living quarters including its own kitchen. This is our private non-business space. Everything else is 100% there as our business and is completely deductible.

Same with us.
Off topic a bit: Because we have our own house on the property is why I don't have the traditional "welcome to my home" thinking. I think there's a big difference emotionally. When DH and I talk about where something is, we say "It's in the inn" or "the cottage". Guests are not 'sharing our home'.

 

[gillumhouse]

The part the worries me is the gotcha of having to pay back any depreciation when I sell..........

The part the worries me is the gotcha of having to pay back any depreciation when I sell.........

This is why we all want to die with our boots on...
.

You can always do a 1031 exchange for another investment property. Say I sell for $1.5 million and my property has been fully depreciated. I can turn around and buy an investment property which is "like kind - meaning investment/rentable" (or 2 or 3) that total the $1.5 million and not have to pay any taxes on it so long as I keep those properties for two years. So I could buy 3 $500,000 condos at the beach and rent them out. After 2 years, I could move into one of them and keep getting income from the other two.
That's why they won't have to take me out in a box.
.

MtnKeeper is correct, as was the initial "question." (My husband is an attorney.) IF you are just setting up your B&B consider a couple of things:
1) can't deduct parts of inn you use, even for 5 sec. - so cannot deducts/depreciate hall\ways, DR, kitchen (unless you have two), etc. We have a party room/office on a separate meter for power. THAT is 100% depreciated/deducted. Only about 2/3 of the rest of the inn (historic part) can be.
2) Less you depreciate less you have to "pay back" so a balance is a good idea. Less deduction now can be better later.
3) IRS used to really go after innkeepers overdoing it (on deductions and other things) so do it by the book
4) always seek the counsel of a CPA.
5) we've used the like kind exchange to go from a duplex (sold) to vacant land. The categories are pretty broad. Get an attorney or CPA to help you. You also need a specific company which handles the transfer (for a fee).
As we just told a friend who inherited $1 million from her parents recently: Lots to know, lots to learn and lots of responsibility when you actually have money. Much easier being poor, LOL!
.

1) can't deduct parts of inn you use, even for 5 sec. - so cannot deducts/depreciate hall\ways, DR, kitchen (unless you have two), etc. We have a party room/office on a separate meter for power. THAT is 100% depreciated/deducted. Only about 2/3 of the rest of the inn (historic part) can be.

We have an entirely separate living quarters including its own kitchen. This is our private non-business space. Everything else is 100% there as our business and is completely deductible.
.

1) can't deduct parts of inn you use, even for 5 sec. - so cannot deducts/depreciate hall\ways, DR, kitchen (unless you have two), etc. We have a party room/office on a separate meter for power. THAT is 100% depreciated/deducted. Only about 2/3 of the rest of the inn (historic part) can be.

We have an entirely separate living quarters including its own kitchen. This is our private non-business space. Everything else is 100% there as our business and is completely deductible.

Same with us.
Off topic a bit: Because we have our own house on the property is why I don't have the traditional "welcome to my home" thinking. I think there's a big difference emotionally. When DH and I talk about where something is, we say "It's in the inn" or "the cottage". Guests are not 'sharing our home'.
.

I think we depreciated the amount we paid for the house. Since then I got smarter about claiming on taxes - anything on schedule C is on the County Personal Property tax for 10 years as it depreciates.. I think food is the only thing she puts on Schedule C now (unless marketing foes there also - I did not look).
I went to the assessor's office and listed 2/3 of the house as commercial - so 2/3 of utilities are deductible. I have decided it is one of the things I cannot control - so I will treat it like I plan to treat my demise - SURPRISE!!

 

[Garden_Pix_Inn]

The part the worries me is the gotcha of having to pay back any depreciation when I sell..........

The part the worries me is the gotcha of having to pay back any depreciation when I sell.........

This is why we all want to die with our boots on...
.

You can always do a 1031 exchange for another investment property. Say I sell for $1.5 million and my property has been fully depreciated. I can turn around and buy an investment property which is "like kind - meaning investment/rentable" (or 2 or 3) that total the $1.5 million and not have to pay any taxes on it so long as I keep those properties for two years. So I could buy 3 $500,000 condos at the beach and rent them out. After 2 years, I could move into one of them and keep getting income from the other two.
That's why they won't have to take me out in a box.
.

MtnKeeper is correct, as was the initial "question." (My husband is an attorney.) IF you are just setting up your B&B consider a couple of things:
1) can't deduct parts of inn you use, even for 5 sec. - so cannot deducts/depreciate hall\ways, DR, kitchen (unless you have two), etc. We have a party room/office on a separate meter for power. THAT is 100% depreciated/deducted. Only about 2/3 of the rest of the inn (historic part) can be.
2) Less you depreciate less you have to "pay back" so a balance is a good idea. Less deduction now can be better later.
3) IRS used to really go after innkeepers overdoing it (on deductions and other things) so do it by the book
4) always seek the counsel of a CPA.
5) we've used the like kind exchange to go from a duplex (sold) to vacant land. The categories are pretty broad. Get an attorney or CPA to help you. You also need a specific company which handles the transfer (for a fee).
As we just told a friend who inherited $1 million from her parents recently: Lots to know, lots to learn and lots of responsibility when you actually have money. Much easier being poor, LOL!
.

1) can't deduct parts of inn you use, even for 5 sec. - so cannot deducts/depreciate hall\ways, DR, kitchen (unless you have two), etc. We have a party room/office on a separate meter for power. THAT is 100% depreciated/deducted. Only about 2/3 of the rest of the inn (historic part) can be.

We have an entirely separate living quarters including its own kitchen. This is our private non-business space. Everything else is 100% there as our business and is completely deductible.
.

1) can't deduct parts of inn you use, even for 5 sec. - so cannot deducts/depreciate hall\ways, DR, kitchen (unless you have two), etc. We have a party room/office on a separate meter for power. THAT is 100% depreciated/deducted. Only about 2/3 of the rest of the inn (historic part) can be.

We have an entirely separate living quarters including its own kitchen. This is our private non-business space. Everything else is 100% there as our business and is completely deductible.

Same with us.
Off topic a bit: Because we have our own house on the property is why I don't have the traditional "welcome to my home" thinking. I think there's a big difference emotionally. When DH and I talk about where something is, we say "It's in the inn" or "the cottage". Guests are not 'sharing our home'.
.

: Because we have our own house on the property is why I don't have the traditional "welcome to my home" thinking. I think there's a big difference emotionally. When DH and I talk about where something is, we say "It's in the inn" or "the cottage". Guests are not 'sharing our home'.

Well, we certainly SEE our place the same way (bought it to be a B&B and really don't see it as our "home"...(and our first inn was next door so we started with that sort of house/inn separation). We live on the 3rd floor of inn #2 and the B&B kitchen is also ours; the catering kitchen is for caterers and guests.
These days, I can no longer remember WHEN I had a home that was just my home (prior to 1988!) Guests these days compliment our "home" and I do not correct them. I did jump on a guest who said "Do you enjoy your retirement; what did you do before ?"
Honey, this innkeeping stuff is WORK. Do not think for a moment it is retirement!!! Especially IF you want to use the words REST in the same sentence!