Truebooks CPA advisors…worth it?

Question

Hey guys,

I own two vacation rental properties with a 50% partner and personally manage them myself. Both properties have a fair amount of amenities since they’re on the water and one has a pool.

After listening to podcast #689 with Matt Bontrager, I was floored with the notion that we could potentially save tens of thousands in taxes since I definitely qualify under the “material participation” rule, so I hurriedly booked a consult with his group, Truebooks CPA.

After hanging up I realized that I was still buzzing from listening to the podcast when we spoke and forgot to ask the most basic of questions to ascertain whether or not their services make sense.

So I bring my queries to the hive…

1. Does cost segregation make sense for STRs if owned jointly with a 50/50 partner?

2. How much does a cost segregation cost to get done?

3. If we engage with a tax advisor and then hand our CPA their plan, will the CPA be able to just “run with it”?

4. Does anyone have firsthand experience working with TrueBooks?

Here are the two properties:

Cottage on the Bay:

www.rodobeach.com

Dameron Farm:

www.dameronFarm.com

Yonah Weiss · Answer

Michael, the cost seg doesn't need to be completed before the end of the year to benefit for 2022 (and 100% bonus depreciation), as long as it's completed before one files 2022 taxes. Still plenty of time.

Michael Baum · Answer

@Yonah Weiss, right! I should have been more clear. @Tim Blanchard, Ok. Well, they took about 30 seconds to come up for me and changing pages takes another 30 seconds. I have a gig connection hard wired so it isn't me for sure. I might ask them about it. I PMd you.

Basit Siddiqi · Answer

1. Does cost segregation make sense for STRs if owned jointly with a 50/50 partner?A good question to ask your CPA. It might make sense if you can offset the losses against your income. 2. How much does a cost segregation cost to get done?There are 'two' types of cost segregation reports - DIY and reports generated/prepared by engineers.The cost depends on the type you choose. 3. If we engage with a tax advisor and then hand our CPA their plan, will the CPA be able to just “run with it”?In theory yes, but it also depends on the risk tolerance of your CPA. They might think your tax advisor is being too aggressive and not apply it, at which case you can switch CPA's.It can also be that your CPA has more knowledge than the tax advisor who didn't know all your facts when you presented it to them.

Julio Gonzalez · Answer

@Tim Blanchard Your properties definitely have the potential to benefit from a cost segregation study. Determining whether to do a cost segregation study or not has a lot variables. What was the purchase price of your property? Are you in an area where land is very valuable leaving you with less to depreciate? Some other factors to consider - How long are you planning to hold this property? If less than two years, cost seg probably isn't a good route. Are you planning to do any renovations? If so, I always recommend getting the study done prior to rehabbing. What is your ROI and the amount paid for a cost seg study? Do you have a current need for that cash flow generated from the tax savings? Could you go reinvest it in another property to build even more income? Would you have net income or net loss without the cost seg study? Are your real estate investments active or passive? Are your losses locked up against your passive income? There are a lot of factors to consider when get a cost seg study to determine if the benefits outweigh the costs. If you are able to get REPS status, that would help tremendously. Have you obtained any detailed cost/benefit analysis quote? Most cost segregation study companies provide the quote for free. Is it a reputable company and will the documentation provided from the study hold up in an audit? Does your current CPA specialize in real estate taxation? If you need any help or have any questions, feel free to reach out!

Tim Blanchard · Answer

They’re both on Rackspace and load just fine for me. Thanks.

Michael Baum · Answer

@Tim Blanchard, who is hosting your sites? They are slow as molasses.

Michael Baum · Answer

Hey @Tim Blanchard, cost segregation can be worth it and it needs to be done asap for maximum benefit as it changes next year. Might not be enough time.On the cost you will have to check as it will be different for every place and area.Regarding the tax advisor, they should be able to put together a plan, but it would be good to engage the CPA at the same time. Even better would be to get a CPA that can do both.Never have worked with Truebooks so I can't tell ya.