All Forum Posts by: Aaron Zimmerman

As others have said, cash out/in does not equal profits. 

You would be able to deduct interest, taxes, insurance, and much more. It would be taxed as self employment income which would increase your tax burden. That said, you may qualify for QBI which would reduce the tax burden some. Definitely talk with a CPA that understands your situation. 

@Nate Pucel - as others have said, file an extension and hire it out.

There's a lot of items that you could capitalize as part of the rehab in addition to the hard costs (mortgage interest, taxes, insurance). This will help you out if and when you sell the property. In the meantime, more depreciation will be taken. 

As others have said, you can deduct up to $25k in losses, provided your income is below $100k without being a real estate professional. 

I'm very confused about question #3. It would be a similar scenario to this property. These costs would be capitalized as part of your basis in the property and depreciated, assuming it's a long term rental.

There are a lot of great CPAs on here. Given that you're in Texas and no state tax filing, you could work remotely if that's your preference. 

There are a lot of great CPAs in the forums. I'd recommend the tax pros finder on here or reaching out to people at your local meetups. 

It probably is beneficial to get a CPA or at least someone to double check that you're doing things reasonably correct. Calculating the right basis is crucial on rental properties and has large impacts down the road. 

@Daniela Damjanoski - I would recommend looking on the forums for CPAs or using the Biggerpockets CPA finder! There are a lot of great CPAs on here.

Thank you for the post. As a relatively younger CPA in the industry, it is good to hear things from the clients perspective and the journey people go through to find their trusted advisor.

For those that have mentioned about being billed by the hour, please know that the tide is shifting in the CPA industry to flat fee, slowly but surely!

Kara,

You've absolutely come to the right place with BP. I'd recommend reaching out to people in the forums or using the tax pros find here. There's a lot of quality CPAs on here that can assist as it pertains to your situation.

The way form 8582 will work is you show loss you have. The loss would be calculated as income less total expenses (including the 481(a) adjustment). Your income affects the deductibility of the loss. If you have under $100k MAGI, you can take up to $25k in loss against active income. The rest would roll forward into future years. 

Given your timeline, I'd recommend extending your return to get this right and to work with a tax professional.

Please note that this is not tax advice specific to your situation. 

Agreed with @Ashish Acharya. You will want to talk with your CPA about if the S Corp is best. A lot of times, it's best to start out as an LLC and then convert over to an S corp if there are enough profits. The election can be made retroactively.