I paid a contractor to make roof repairs to a house in my LLC. How can I deduct this cost?
This new roof should go on the 2016 LLC business return, but you probably won't be able to expense the entire roof as a repair.  A new roof is most likely a capital improvement, which means that it would need to be depreciated over many years instead of expensed all in 2016.  The depreciation period for a residential rental property is 27.5 years.  Please consider seeking a CPA or Enrolled Agent for the preparation of your LLC business return. See also: IRS Tangible Property Regulations FAQ list When you made the loan to the LLC (by paying the contractor and making a contract with the LLC), did you state an interest rate?  If not, you and your brother should correct the contract so that an interest rate is stated, then follow it.  The LLC needs to pay you interest until the loan is paid off.  You need to report the interest income on your personal return, and the LLC needs to report the interest expense in its business return.
The LLC will file its own business taxes which may or may not have business level income and expenses.  At the end, the LLC will issue Schedule K-1 tax forms to the members, that based on their percentage ownership, will reflect the percentage share of the income/losses.    From an individual standpoint, the members need only worry about the K-1 form they receive.  This has quite a few pass-through categories from the LLC, but the Income/Loss may be the only used one.  The individual will likely include the K-1 by filing a Schedule-E along with their 1040 form.  The 1040 Schedule-E has some ability to deduct expenses as an individual. Generally it's best not to commingle expenses.  Additional schedule-E expense reporting is generally for non-reimbursed, but related business expenses.  If a member paid certain fees for the LLC, it is better for the LLC to reimburse him and then deduct the expense properly.  Schedule-E is on a non-LLC, personal level. The LLC (not you) is probably in debt to the California FTB. Any LLC registered in California must pay at least $800 a year, until it is officially dissolved (i.e.: notice of cancellation/dissolution properly filed with the California Secretary of State). The FTB may come after members (including you) personally, if it can prove that the failure to pay was due to your negligence. Talk to a CA-licensed EA/CPA about how to resolve this. Otherwise, at least from what you've described, there were no other taxable events. LLC is a disregarded entity, so the IRS doesn't care about it much anyway (unless someone was stupid enough to elect it to be taxed as a corporation, that is). Keep in mind that when in doubt - you are always better off with a professional (a CPA/EA licensed in your State) advice. First, you should probably have a proper consultation with a licensed tax adviser (EA/CPA licensed in your State). In fact you should have had it before you started, but that ship has sailed. You're talking about start-up expenses. You can generally deduct up to $5000 in the year your business starts, and the expenses in excess will be amortized over 180 months (15 years). This is per the IRC Sec. 195. The amortization starts when your business is active (i.e.: you can buy the property, but not actually open the restaurant - you cannot start the depreciation). I have a couple questions about accounting - should all the money I   spent be a part of capital spending? Or is it just a part of it? If it qualifies as start-up/organizational expenses - it should be capitalized. If it is spent on capital assets - then it should also be capitalized, but for different reasons and differently. For example, costs of filing paperwork for permits is a start-up expense. Buying a commercial oven is a capital asset purchase which should be depreciated separately, as buying the tables and silverware. If it is a salary expense to your employees - then it is a current expense and shouldn't be capitalized. Our company is LLC if this matters.  It matters to how it affects your personal tax return. "-Alain Wertheimer I'm a hobbyist... Most (probably all) of those older items were sold both prior to my establishing the LLC This is a hobby of yours, this is not your business. You purchased all of these goods for your pleasure, not for their future profit. The later items that you bought after your LLC was establish served both purposes (perks of doing what you love).  How should I go about reporting this income for the items I don't have records for how much I purchased them for?  There's nothing you can do. As noted above, these items (if you were to testify in court against the IRS). ""Losses from the sale of personal-use property, such as your home or car, aren't tax deductible."" Source Do I need to indicate 100% of the income because I can't prove that I sold it at a loss? Yes, if you do not have previous records you must claim a 100% capital gain. Source Addition: As JoeTaxpayer has mentioned in the comments, the second source I posted is for stocks and bonds.  So at year begin of 2016, I started selling what I didn't need on eBay and on various forums [January - September]. Because you are not in the business of doing this, you do not need to explain the cost; but you do need to report the income as Gross Income on your 1040. Yes, if you bought a TV three years ago for a $100 and sold it for $50, the IRS would recognize you earning $50.  As these are all personal items, they can not be deducted; regardless of gain or loss. Source Later in the year 2016 (October), I started an LLC (October - December) If these are items that you did not record early in the process of your LLC, then it is reported as a 100% gain as you can not prove any business expenses or costs to acquire associated with it.  Source Refer to above answer.  Refer to above answer.  Conclusion Again, this is a income tax question that is split between business and personal use items. This is not a question of other's assessment of the value of the asset. It is solely based on the instruments of the IRS and their assessment of gains and losses from businesses. As OP does not have the necessary documents to prove otherwise, a cost basis of $0 must be assumed; thus you have a 100% gain on sale." "There are way too many details missing to be able to give you an accurate answer, and it would be too localized in terms of time & location anyway -- the rules change every year, and your local taxes make the answer useless to other people. Instead, here's how to figure out the answer for yourself. Use a tax estimate calculator to get a ballpark figure. (And keep in mind that these only provide estimates, because there are still a lot of variables that are only considered when you're actually filling out your real tax return.) There are a number of calculators if you search for something like ""tax estimator calculator"", some are more sophisticated than others. (Fair warning: I used several of these and they told me a range of $2k - $25k worth of taxes owed for a situation like yours.) Here's an estimator from TurboTax -- it's handy because it lets you enter business income. When I plug in $140K ($70 * 40 hours * 50 weeks) for business income in 2010, married filing jointly, no spouse income, and 4 dependents, I get $30K owed in federal taxes. (That doesn't include local taxes, any itemized deductions you might be eligible for, IRA deductions, etc. You may also be able to claim some expenses as business deductions that will reduce your taxable business income.) So you'd net $110K after taxes, or about $55/hour ($110k / 50 / 40). Of course, you could get an answer from the calculator, and Congress could change the rules midway through the year -- you might come out better or worse, depending on the nature of the rule changes... that's why I stress that it's an estimate. If you take the job, don't forget to make estimated tax payments! Edit: (some additional info) If you plan on doing this on an ongoing basis (i.e. you are going into business as a contractor for this line of work), there are some tax shelters that you can take advantage of. Most of these won't be worth doing if you are only going to be doing contract work for a short period of time (1-2 years). These may or may not all be applicable to you. And do your research into these areas before diving in, I'm just scratching the surface in the notes below." Unless you own a business and the car is used in that business you can't write off your auto repairs. If you start a sole-proprietorship in your own name there are all sorts of things you can write off as long as there is a reasonable expectation of profit. This includes a portion of your car repairs, a portion of your home expenses (assuming it's a home-based business), any tools used in the business, all kinds of stuff. The portion of your auto is based on total miles driven in the year vs. total miles driven for business purposes. Eligible auto expenses include repairs, gas/oil, insurance, parking, and interest on the auto loan. There are some things to remember: I'm no expert on California business law. Talk to a lawyer and an accountant if you wish to go this way. Many offer a half-hour free session for new clients. Have you found a general contractor to rebuild your home? I would imagine that someone with a bit of expertise in the area is used to dealing with insurance companies, floating the money for a rebuild, and hitting the gates to receive payment for work accomplished.   Business are used to not receiving payment when work is accomplished and it is part of the risk of being in business.  They have to buy materials and pay employees with the expectation of payment in the future.  Much like workers go to work on a Monday for the work that day, three Friday's later, business often have to float costs but for longer periods of time. If you are looking to be your own general contractor then you will have to float the money on your own. The money should not be used for living expenses or mortgage payments, it should be used for down payments in order to get the work of rebuilding started. I'm a CPA and former IRS agent and manager. Whether you are a cash or accrual basis taxpayer, you get to deduct the expense when your card is charged. Think of it this way: You are borrowing from the credit card company or bank that issued the credit card. You take that money to make a purchase of a product or service. You now have an expense and a liability to a third party. When you pay off the liability, you do not get to take a deduction. Your deduction is when you pay for the expense. Depending on what you purchased, you may have to capitalize it. As noted above but with sources An improvement materially adds to the value   of your home, considerably prolongs its useful   life, or adapts it to new uses. You must add the   cost of any improvements to the basis of your   home. You cannot deduct these costs. Source Page 11, Adjusted Basis, Improvements Second, A repair   keeps your home in an ordinary, efficient operating   condition. It does not add to the value of   your home or prolong its life. Repairs include repainting   your home inside or outside, fixing your   gutters or floors, fixing leaks or plastering, and   replacing broken window panes. You cannot   deduct repair costs and generally cannot add   them to the basis of your home. Source Page 12, Adjusted Basis, Repairs versus improvements Generally, an expense for repairing or maintaining   your rental property may be deducted if you   are not required to capitalize the expense.  You must capitalize any expense   you pay to improve your rental property.   An expense is for an improvement if it results in   a betterment to your property, restores your   property, or adapts your property to a new or   different use. Source Page 5, Repairs and Improvements  Good Luck, You're doing business in the US and derive income from the US, so I'd say that yes, you should file a non-resident tax return in the US. And in Connecticut, as well, since that's where you're conducting business (via your domestic LLC registered there). Since you paid more than $600 to your contractor, you're probably also supposed to send a 1099 to him on that account on behalf of your LLC (which is you, essentially, if you're the only member). On a personal income tax return home improvements are generally not deductible on a federal level.  There might be some exceptions made for special tax programs, such as solar panels, but they tend to be the exception rather than the rule. I contacted Stephen Fishman, J.D., the author of Home Business Tax Deductions, to let him know that this question was missing from his book. He was kind enough to send a reply. My original phrasing of the question: If your car is used for both business and personal use, and you deduct via the actual expense method, do trips to the mechanic, gas station, and auto parts store to service or repair the car count as business miles, personal miles, or part-business-part-personal miles? What about driving the newly-purchased car home from the dealership? And his response: Good question. I can find nothing about this in IRS publication or elsewhere. However, common sense would tell us that the cost of driving to make car repairs should be deductible. If you use your car for business, it is a business expense, just like transporting any other piece of business equipment for repairs is a business expense. This should be so whether you use the standard mileage rate or actual expense method. You should probably reduce the amount of your deduction by the percentage of personal use of the car during the year. The same goes for driving a car home from the dealer. "While the question is very localized, I'll answer about the general principle. My main question is with how far away it is (over 1000 miles), how do   I quantify the travel expenses? Generally, ""necessary and ordinary"" expenses are deductible. This is true for business and also true for rentals. But what is necessary and what is ordinary? Is it ordinary that a landlord will manage the property 1000 miles away by himself on a daily basis? Is it ordinary for people to drive 1000 miles every week? I'd say ""no"" to both. I'd say it would be cheaper for you to hire a local property manager, thus the travel expense would not be necessary. I would say it would be cheaper to fly (although I don't know if its true to the specific situation of the OP, but as I said - its too localized to deal with) rather than drive from Texas to Colorado. If the OP thinks that driving a thousand miles is indeed ordinary and necessary he'll have to justify it to the IRS examiner, as I'm sure it will be examined. 2 trips to the property a year will be a nearly 100% write-off (2000   miles, hotels, etc). From what I understood (and that is what I've been told by my CPA), IRS generally allows 1 (one) trip per year per property. If there's an exceptional situation - be prepared to justify it. Also, keep all the receipts (like gas, hotel, etc.... If you claim mileage but in reality you took a flight - you'll get hit hard by the IRS when audited). Also while I'm up there am I allowed to mix business with pleasure? You cannot deduct personal (""pleasure"") expenses, at all. If the trip is mainly business, but you go out at the evening instead of staying at the hotel - that's fine. But if the trip is ""business"" trip where you spend a couple of hours at your property and then go around having fun for two days - the whole trip may be disallowed. If there's a reasonable portion dedicated to your business/rental, and the rest is pleasure - you'll have to split some of the costs and only deduct the portion attributed to the business activities. You'll have to analyze your specific situation, and see where it falls. Don't stretch the limits too much, it will cost you more on the long run after all the audits and penalties. Can I also write off all travel involved in the purchase of the   property? Although, again, the ""necessary and ordinary"" justification of such a trip is arguable, lets assume it is necessary and ordinary and generally justified. It is reasonable to expect you to go and see the property with your own eyes before the closing (IMHO, of course, I'm not an authority). Such an expense can be either business or investment expense. If its a business expense - its deductible on schedule C. If its an investment expense (if you do buy the property), its added to the cost of the property (capitalized). I'm not a tax adviser or a tax professional, and this is not a tax advice. This answer was not written or intended to be used, and cannot be used, for the purpose of avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code. You should seek a professional consultation with a CPA/Attorney(tax) licensed in your State(s) or a Federally licensed Enrolled Agent (EA)." "Your corporation would file a corporate income tax return on an annual basis. One single month of no revenue doesn't mean much in that annual scheme of things. Total annual revenue and total annual expenses are what impact the results. In other words, yes, your corporation can book revenues in (say) 11 of 12 months of the year but still incur expenses in all months. Many seasonal businesses operate this way and it is perfectly normal. You could even just have, say, one super-awesome month and spend money the rest of the year. Heck, you could even have zero revenue but still incur expenses—startups often work like that at first. (You'd need investment funding, personal credit, a loan, or retained earnings from earlier profitable periods to do that, of course.) As long as your corporation has a reasonable expectation of a profit and the expenses your corporation incurs are valid business expenses, then yes, you ought to be able to deduct those expenses from your revenue when figuring taxes owed, regardless of whether the expenses were incurred at the same approximate time as revenue was booked—as long as the expense wasn't the acquisition of a depreciable asset. Some things your company would buy—such as the computer in your example—would not be fully deductible in the year the expense is incurred. Depreciable property expenses are deducted over time according to a schedule for the kind of property. The amount of depreciation expense you can claim for such property each year is known as Capital Cost Allowance. A qualified professional accountant can help you understand this. One last thing: You wrote ""write off"". That is not the same as ""deduct"". However, you are forgiven, because many people say ""write off"" when they actually mean ""deduct"" (for tax purposes). ""Write off"", rather, is a different accounting term, meaning where you mark down the value of an asset (e.g. a bad loan that will never be repaid) to zero; in effect, you are recognizing it is now a worthless asset. There can be a tax benefit to a write-off, but what you are asking about are clearly expense deductions and not write-offs. They are not the same thing, and the next time you hear somebody using ""write off"" when they mean ""deduction"", please correct them." "The answer is ""Yes"", You can deduct them. As long as you showed that you put in effort to make a profit then you can deduct business expenses."