Cindy in SD on tue 8 mar 05
I hate to trouble you with this, but I can't seem to find the answer
As I'm a slow builder, I've been working on my studio for quite a while.
Last tax filling we began depreciating it, but it wasn't quite finished.
Last year, we spent more money on finishing it. So where do I put this
expense? I can't find a spot for it anywhere. I'm tempted to slip it in
under maintenance. The book says not to put it there, that it must be
capitalized, but how do I do that? Turbo tax says this is a "capital
expenditure", but then never asks for it to be entered.
Cindy in SD
Jeremy/Bonnie Hellman on tue 8 mar 05
If the studio had been put into service ("in service" is the technical term)
in 2003, then it was appropriate to begin depreciating it over its 40 year
I hope you separated out the various components of the building so if they
end up being replaced before 40 years, you can write off the remaining
If your 2004 additional costs are building costs, they, too, need to be
depreciated, starting when they were put into service. You add them as an
additional asset (on the asset entry addition page of Turbo Tax), describing
them accurately enough so you can identify them (but at least calling them
building improvements 2004). In Turbo Tax you'll then identify them as
"building improvements" if they are structural and you'll end up
depreciating them over 40 years, starting with the month they were put into
(If you're looking for logic, don't give any thought as to how those
improvements will be around after the building is fully depreciated. )
You can have building improvements every year, if you continue to make
improvements and each starts its own depreciation period. The life of each
addition will depend on the tax code at the time the new asset is put into
If they qualify for depreciation, it is wrong to expense them as maintenance
or something else. But if you are maintaining an existing asset, then you
get to expense it. Some assets qualify for Sec 179 depreciation (when they
get written off entirely in the year the asset is placed into service) and
some currently qualify for Bonus Depreciation federally. Some states accept
bonus depreciation, some don't. The depreciation rules, particularly for
construction are not simple.
Without seeing the entire return and discussing all the details, it's hard
to give you a steer in the right direction. I would caution anyone else
whose situation is not identical to NOT blindly follow what they think I'm
saying here. Please consult your own tax advisor, someone familiar with your
exact tax situation. Sometimes an individual's tax situation makes it better
to do something that is not immediately obvious. Often there are legal
choices in the tax code. Sometimes there are no legal choices.
Those of us who earn our living as CPAs preparing tax returns and giving tax
advice spend a lot of time staying educated and informed about the many
changes our legislators and the Internal Revenue Service seem to implement
every single year.
Preparing income taxes relying on a generic tax program is like using your
glaze calculation computer program. That program will give you general
guidelines if you know how to use the program, but which won't necessarily
give you the BEST way to formulate your glaze. That takes experience and
additional education and actual hands-on experience. Our glaze gurus will
never be replaced by a computer program. A good CPA will never be replaced
by a tax program. My 2 cents.
Cindy, I hope this helps.
Bonnie E. Hellman, CPA
----- Original Message -----
From: "Cindy in SD"
Sent: Tuesday, March 08, 2005 11:55 AM
Subject: Bonnie: A tax question
> Hi, Bonnie
> I hate to trouble you with this, but I can't seem to find the answer
> As I'm a slow builder, I've been working on my studio for quite a while.
> Last tax filling we began depreciating it, but it wasn't quite finished.
> Last year, we spent more money on finishing it. So where do I put this
> expense? I can't find a spot for it anywhere. I'm tempted to slip it in
> under maintenance. The book says not to put it there, that it must be
> capitalized, but how do I do that? Turbo tax says this is a "capital
> expenditure", but then never asks for it to be entered.
> Pleeeaase help!
> Cindy in SD
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