All Forum Posts by: Ahad Ali

Quote from @Anthony Tran:

Hello all,

I have a property management company (LLC). I want my daughter to learn real estate. What is the best way to pay her?

An employee and give her a W2? Hire her as a contractor and give her a 1099? or lease her some properties and have her sublease out?

In the same token, should I keep her in my tax filing? or have her file independently?  She is in her first year of college.

Thank you,  Anthony

Paying her with W-2 will benefit you more because you can write off more expenses such as salary paid and employer taxes. Paying her with 1099 is doable too but then she will have to pay self-employment taxes. Although I recommend speaking with a CPA first before making any decision.

You can keep her as dependent as long as the salary paid is not more than the income of the taxpayer. She will still have to file her tax return but label is as "dependent of another."

Quote from @Aahil B.:

Hey Everyone!

Happy new year!

I was wondering if I were to purchase a property under my name at a conventional loan and maybe 6 months to a year from now I rent it out and were to purchase an umbrella policy, should I create an LLC to mainly deal with the operating side for collecting rent/ and creating lease agreements, etc or what should I do? Curious for someone if they only have 1-2 properties and how they go about it and if they slowly grow their portfolio?

Thank you in advanced!

The main reason business owners choose to organize their business as an LLC involves avoiding personal liability as a result of the business’s activities. Limited liability means that you, as the owner, will not become personally liable for the company's debts or liabilities. Therefore, if you have a fear of lawsuits as a business owner, the LLC structure may look very appealing to you. I would suggest you talk to a tax expert to discuss further regarding this topic to see the best outcome for you. 

Quote from @George Post:

Thanks guys! @Account Closed & @Ahad Ali! Thank you for your input as well @Chris Seveney. Happy New Year to you all :)!

 Happy New Year !

Quote from @George Post:

Howdy my Tax Pro's!

Let's say there is a couple. The guy has owned a house for 8 years, she's been living with him for over two years, then they get married this Winter. They are looking to sell that house and move this Spring. Would they then qualify for the full $500k exemption? Does she need to get added to Title prior to sale? Do they need to be married for over years for the full exemption?

TIA!

 Hello, 

They will not qualify for 500k exemption. They will be eligible for 250k exemption. They need to be married for 2 years or more to qualify for 500k exemption. she does not necessarily need to be added to the title to get the exemption after 2 years of marriage.

Hi @Aytaj Vily

It is ideal to open up a LLC. LLC will give you the protection against personal liabilities for certain debts and claims against business. Also if you income is above $150k then you won't be able to claim any of the losses on real estate business unless you have an LLC. With an LLC you can claim all the losses without having any income limitations. I would suggest you talk to a tax expert to discuss further regarding this topic to see the best outcome for your 2024 taxes.

Hope this helps! 

Finding a CPA wo understand real estate will pay dividends in the long run, so take your time to research and select someone who is experienced and reliable. It's also a good idea to start talking to some well before tax season to ensure you have enough time to make an informed decision. Also I would not only focus on local CPA's. There are a lot of virtual and remote CPA firms that are highly experienced in the real estate field.

Yes this is a doable but you must make sure you pass the 3 test set by IRS be able to take the STR loss including the substantial services test. You may want to consult with a CPA to discuss in more detail and get specific advice.

A sole proprietorship is an unincorporated business and the default choice for anyone who runs a business but hasn't set up another formal business structure, such as an LLC.

As a sole proprietor, there's no separation between your personal and business assets and expenses. You are personally responsible for all your business's debts and obligations on the personal side. However, an LLC is taxed the same way as a sole proprietorship, but an LLC can elect to be taxed as an S corp or a C corporation. I would suggest you talk with a tax professional to get more detailed information regarding the LLC election.

As an SMLLC, you may claim a home office deduction and other miscellaneous expenses. Since you are located in NY and LLC is formed in Indiana, you need to pay Indiana state taxes as well. It's better to contact a local CPA firm that specializes in real estate. Flipping properties can still be eligible for 1031 exchanges under certain conditions. The IRS has strict rules that taxpayers need to follow to defer taxes. Again, book a meeting with a CPA who has experience with 1031 exchanges and real estate.

I would recommend to start investing locally. Since this is your first time you would be able to learn a lot while dealing with the process which might not be the case if you buy something out-of-state.

Regarding tax benefits, you might want to talk with a CPA or tax professional in order to make sure you are getting the full benefits. You might need to spend 100 hours to 500 hours a year working on the property depending if you are planning to do short term or long term rental investment to claim real estate loss. Since your income is over $150k, you can not claim any rental loss unless you are actively participating in the rental business.