In 2020, Jamie Monroe was a full-time bookkeeper for The Cheesy Wrench, Inc., but he was always interested in home buying and renovations (in other words, “real estate flipping”). In 2020, inspired by shows he had seen on HGTV, Jamie reduced his hours at The Cheesy Wrench to part-time and founded Skylight Real Estate to pursue his dream of flipping homes. Skyline Real Estate was formed as a single-member LLC and treated like a sole proprietorship, so Jamie reports all items of income and deductions on his Form 1040. In November of 2020, Jamie purchased a single-family home in Bloomington, IN that needed significant repairs. worked every weekend and devoted substantial effort to renovate the home. Jamie’s intention was to immediately sell the home when renovations were complete and reinvest the proceeds into another home. Jamie incurred many expenses while renovating the home including construction fees, engineering costs, utilities, real estate taxes, appliance purchases, etc. After advertising and listing the home on the MLS, Jamie finally sold the home in December of 2021 and realized a gain on the sale. No one lived in the home while Jamie owned it. He then bought another single-family home in Nashville, IN to renovate and resell. During the entire renovation process, Jamie continued to work part-time as a bookkeeper for The Cheesy Wrench. Jamie has receipts for all improvements made to the home and construction fees. Jamie is single and has no dependents. Jamie has heard that there are different tax implications for real estate investors versus dealers and would like to know how to treat (1) the gain on the home sale and (2) the expenses he incurred during the renovations. He would also like to know whether he can claim depreciation deductions on the home.

What are Jamie's tax deductions for 2020 and 2021?