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View Full Version : New shop build - can it be deducted?


queen of spades
03-12-2011, 08:54 PM
I built a new shop for my business (LLC) last year. Should I consider including as a deduction on my taxes?

queen of spades
03-13-2011, 09:10 AM
I'm only "dumbfounded" by the tone of your reply.

I planned to check in with a local tax guy next week, but was interested to see what others thought. We are allowed to deduct utilities, rental costs, gas to jobs, and equipment among other things. If I use the shop for my business, why not. What is the difference between a shop and a new $40k piece of equipment? Both are used for the business.

Hardly a stupid question. Only stupid people wouldn't want to save money and reduce taxes paid.

SDelPrete
03-13-2011, 09:25 AM
yes you should deduct the cost of building it

JFGauvreau
03-13-2011, 09:34 AM
Yes, is it after all your business HQ.

nepatsfan
03-13-2011, 09:37 AM
I'm only "dumbfounded" by the tone of your reply.

I planned to check in with a local tax guy next week, but was interested to see what others thought. We are allowed to deduct utilities, rental costs, gas to jobs, and equipment among other things. If I use the shop for my business, why not. What is the difference between a shop and a new $40k piece of equipment? Both are used for the business.

Hardly a stupid question. Only stupid people wouldn't want to save money and reduce taxes paid.

The only thing that dumbfounds me is the fact that someone would ever think that it would for any reason not be tax deductable. You can deduct a room in your house as a home office. Why on earth would anyone think that a building built and dedicated for business would not be tax deductable.

New2TheGreenIndustry
03-13-2011, 09:47 AM
I was asking my accountant about building a shop, and he thought that I should build it and rent it to the company.

queen of spades
03-13-2011, 10:03 AM
Thanks all -- will confirm options with a tax person next week.

snomaha
03-13-2011, 10:43 AM
Thanks all -- will confirm options with a tax person next week.

Not a tax person - commercial buildings (land excluded) are depreciated over 39 years using straight line depreciation.

snomaha
03-13-2011, 10:52 AM
I was asking my accountant about building a shop, and he thought that I should build it and rent it to the company.

Thought I would throw out a couple of pros and cons based on my experience.

pros - Own an asset that hopefully appreciates. Can collect rental income that is not subject to SS/med taxes.

cons - Own an asset that does not appreciate. Your company is the biggest or only tenant - if you go out of business you have lost that tenant.

JB1
03-13-2011, 11:52 AM
sure you can, but I wouldn't.

theguynextdoor
03-13-2011, 02:57 PM
sure you can, but I wouldn't.

Just curious, why wouldn't you expense it?

TMlawncare
03-13-2011, 04:28 PM
sure you can, but I wouldn't.

You wouldn't what? Count this as an expense? Depreciate it? What?

GreenI.A.
03-13-2011, 04:49 PM
I was asking my accountant about building a shop, and he thought that I should build it and rent it to the company.

I was told just the oposite by my accountant. When you personally own something and rent it to your business it throws up red flags to the IRS and could up your chances for an audit for both the business and your self. He said the same for claiming a room in your house. If you get audited and the IRS finds that your kids bike is in the shop or anything else personal then they can consider it mixed use and you can be fined, or foced to pay back taxes if you have been claiming it for years and you just finally got audited.

He said it is safer to claim the portion of it that you can on your person taxes as an improvement to your home property instead. He also told my that the only time it is safe to claim building/office expenses is if it is a mortgage in the companies name or a lease, in which you do not personaly own the prop. He did say that if you owned the property under another business name such as "XYZ properties" then you should be safe

New2TheGreenIndustry
03-13-2011, 05:02 PM
I was told just the opposite by my accountant. When you personally own something and rent it to your business it throws up red flags to the IRS and could up your chances for an audit for both the business and your self. He said the same for claiming a room in your house. If you get audited and the IRS finds that your kids bike is in the shop or anything else personal then they can consider it mixed use and you can be fined, or forced to pay back taxes if you have been claiming it for years and you just finally got audited.

He said it is safer to claim the portion of it that you can on your person taxes as an improvement to your home property instead. He also told my that the only time it is safe to claim building/office expenses is if it is a mortgage in the companies name or a lease, in which you do not personally own the prop. He did say that if you owned the property under another business name such as "XYZ properties" then you should be safe

I guess it's a matter of who you talk to. My guy advised me against claiming the shop as he said that was a red flag. He has been doing taxes for 30 years, and works with a lot of businesses locally, so assume he knows what he is talking about.

JB1
03-13-2011, 05:10 PM
it was explained to me in depth, more than I'm gonna explain here, bascically it threw up red flags, don't listen to anybody here, go consult a professional tax person instead of lawn people.

GreenI.A.
03-13-2011, 06:13 PM
it was explained to me in depth, more than I'm gonna explain here, bascically it threw up red flags, don't listen to anybody here, go consult a professional tax person instead of lawn people.

Why not ask the question here? don't you go to your accuntant and ask about questions about lawn care? :laugh::laugh:
But yeah you are right, people have to just use the info here as a rough idea. It is helpful for a guy reading this to see a few of our comments and maybe get a few ideas of questions he should ask his accountant. This also holds true with many of the business aspects on lawnsite whether it is accounting, liceansing, insurance etc.. One thing that is legal in one state may not be for us in another state. Whats said here whould be taken with a grain of salt and just used to give the person ideas of who and what to ask

snomaha
03-14-2011, 09:47 AM
Have your attorney form a LLC that owns the real estate.

bohiaa
03-15-2011, 01:51 AM
it may get touchey:

as you knwo or should. NEW is tax deduction, repair is NOT....

I think if you built it your self the answer is NO. but if you contracted the work out then it's a YES.

meets1
03-15-2011, 07:09 PM
Contracted, built yourself, deduction, taxes, utility cost, everything can be written off somewhere, somehow.

You own building - rent it to the business.

You own building - capital expense, 39.9 yrs decprieation (in my state at least) a few kick backs if you are green, you may deduct property tax, utility charges, upkeep such as add a load of gravel or laid concrete - but if bill is large amount that concrete is itemized over a course of x years.

Do what can. Talk to a pro.

TMlawncare
03-15-2011, 09:21 PM
If you build or have a new facility built for your company, its tax deductible. When the local contruction company builds a new headquarters they depreciate it. When Walmart spends several million on a new store, they depreciate it. When Walgreen adds a new store, the depreciate it. When the local dentist has a new office built for 700k do you think they don't claim this massive investment on their taxes? If you have a legit business and you build a facility just for your business, its a business expense. There is no red flag if the facility is used only for business purpose.

meets1
03-15-2011, 09:32 PM
After re-reading this post what is everyone so scarced for? Every other post says RED FLAG - if biz is legit you do what you can, basically re-investing with in yourself.

I suppose you guys who buy $50-$60K trucks don't depreciate the truck out or itemize fuel, tire repair, etc. Cuz if you haul that boat to the lake and the IRS see's this you'll be red flagged.

New2TheGreenIndustry
03-15-2011, 09:48 PM
If you build or have a new facility built for your company, its tax deductible. When the local contruction company builds a new headquarters they depreciate it. When Walmart spends several million on a new store, they depreciate it. When Walgreen adds a new store, the depreciate it. When the local dentist has a new office built for 700k do you think they don't claim this massive investment on their taxes? If you have a legit business and you build a facility just for your business, its a business expense. There is no red flag if the facility is used only for business purpose.

I believe red flag is it is owned by you personally. Everything you just mentioned would be considered an asset of those companies.

TMlawncare
03-16-2011, 12:16 AM
I believe red flag is it is owned by you personally. Everything you just mentioned would be considered an asset of those companies.


You don't think the dentist office is owned by the dentist. You don't think the construction companies new facility is not owned by the owner. Here in town a roofing company just purchased 3 acres and built a 60 X 125 foot new building on it for his company. You don't think he can claim this $400k expenditure as a business expense even though its his new company building? Are you kidding me. This is basic business 101. If it is an expense related to the operation of the business you can claim it.
Don't you own a company? Does you company have assets. Do you have trucks, mowers, trimmers, skid steers, tractors, trailers, etc? Those are all assets owned by the company. You own the company. Do you claim any of those on your taxes? They are assets after all owned by the owner.
You see an asset is an asset as long as it is vital to the operation of the business. Why do you think we can write off our work boots as a business expense?

TMlawncare
03-16-2011, 12:58 AM
After a little more thought (little research) I think that maybe I am wrong. The problem is that property had a unique trait. It does not depreciate like other assets, therefore is not an expense. Now you can deduct the interest because that is money that you can't get back. Any money paid in on the principle can not be counted as a business expense.
Personally we still rent our facility so I have not be down that road of purchasing. Learn something everyday.

P.Services
03-16-2011, 03:16 AM
TM, you get a ataboy from me. Takes a big man to chew some one out and then come back and say maybe I was wrong. I woulda just left the thread and never came back before I admitted I was wrong. Ataboy!!!
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GreenI.A.
03-16-2011, 01:44 PM
TM - the differnce is that he personlly owns the property. It is not in the companies name. Sam Walton does not personally own the walmart building, Walmart Stores inc owns them, that is the difference. When you own a company (llc, corp, ec...) it is seperate from you personally, doing things that intertwine the two is a red flag. For example if you try to claim a portion of your home's value as a business expense because you have a home based office. It's a red flag because the IRS knows that many people will also use this room for other things such as allowing the kids to do homework in there. Or a home shop may double as a spot to change the oil in the family car. hese are just a few of the things they look for. They get alot more advanced than that i know the MA Dept of Revenue is tied into all the state agencies, you register a boat, ATV, dirtbike, any vehicles, they instantly know and if your registered vehicles add up to over a certain percentage of your income - your red flagged. My accountant had warned me alot about checking everything twice, even 3 times. With these new tax regulations the IRS is going to be looking for reasons to get their foot in the door for audits because they know theres a good chance of finding something they can nail people for

New2TheGreenIndustry
03-16-2011, 08:28 PM
TM - the differnce is that he personlly owns the property. It is not in the companies name. Sam Walton does not personally own the walmart building, Walmart Stores inc owns them, that is the difference. When you own a company (llc, corp, ec...) it is seperate from you personally, doing things that intertwine the two is a red flag. For example if you try to claim a portion of your home's value as a business expense because you have a home based office. It's a red flag because the IRS knows that many people will also use this room for other things such as allowing the kids to do homework in there. Or a home shop may double as a spot to change the oil in the family car. hese are just a few of the things they look for. They get alot more advanced than that i know the MA Dept of Revenue is tied into all the state agencies, you register a boat, ATV, dirtbike, any vehicles, they instantly know and if your registered vehicles add up to over a certain percentage of your income - your red flagged. My accountant had warned me alot about checking everything twice, even 3 times. With these new tax regulations the IRS is going to be looking for reasons to get their foot in the door for audits because they know theres a good chance of finding something they can nail people for

Well said.

meets1
03-16-2011, 09:02 PM
That may be true but heck if you change oil in your wife's car, you (business) charge you (the family) $10.00 to change oil. Sure a little money out of your left pocket into the right pocket. Then explain how farmers can right about all there expenses off in one year, depreicate out the 100 x 100 shop all while storing there boat, 5th wheel, and whatever else toys they have or son has or whatever.

There is a famer in my area that built a big a*& steel shop to the tune of 1.35 million dollars. His board room table sits 24 men. A kitchen like no other. A bathroom than 99% of women would kill for. 100% right off. Says he'll do over a couple years.

TMlawncare
03-16-2011, 10:27 PM
TM, you get a ataboy from me. Takes a big man to chew some one out and then come back and say maybe I was wrong. I woulda just left the thread and never came back before I admitted I was wrong. Ataboy!!!
Posted via Mobile Device

Sometimes when you are just flat wrong, you have to take it on the chin. We lease our shop so we can deduct our payments. Its an expense but if you buy its an asset that does not depreciate. I just was not thinking about it the right way.
Thats one thing you can count on about lawnsite, it you are just plain wrong someone will straighten you out. Thanks guys.

snomaha
03-17-2011, 10:59 AM
Sometimes when you are just flat wrong, you have to take it on the chin. We lease our shop so we can deduct our payments. Its an expense but if you buy its an asset that does not depreciate. I just was not thinking about it the right way.
Thats one thing you can count on about lawnsite, it you are just plain wrong someone will straighten you out. Thanks guys.

The value of the buiding (land excluded) can be depreciated over 39 years.

Set up a comapny that holds the real estae and lease back to your business.

ncknaklawns
03-17-2011, 11:07 AM
Not a tax person - commercial buildings (land excluded) are depreciated over 39 years using straight line depreciation.

X2-what he said.
The question is not whether you should deduct it but how. Like the other guy said, rent it out to the company or depreciate it. See which works better for you.