All Forum Posts by: David M.

@John Clark that assumes you run an account / escrow-like to capture it...

I guess I should add, in general, that depreciation is "nice" as the only non-cash deduction.  However, its something you are REQUIRED to take by the IRS. When you sell, you have to pay that tax pack, even if you didn't put it in your return any or all those years.  So, there is no free lunch.

Of course, this gets into various tax deferment strategies such as 1031, etc.  But, you still don't have direct access to your cash until you sell, or die.

 @Jaron Walling

Well.. I suppose... He is looking at purchasing a duplex / 2 family.  Not sure how its house hacking since one normally lives in one unit at a time...

Yes, real estate investing generally has the benefit of being able to deduct your property's expenses.  You can't do that normally with your primary residence.  That's the basis of the "sales pitch."

@Max Smetiouk yes, his deductions are basically halved because of the 2family setup.

@Aaron Landau

For references, you could look at IRS SchE and its instructions (f1040se i1040sea.  All the major categories of deductible expenses are there since that's where you'd put them.  Also, there is IRS publication 527 (p527) Residential Rental Property.

Otherwise in short, your rent less your expenses (generally mortgage interest, insurance, taxes, repairs) and less depreciation is your profit/loss for federal purposes.  Many find themselves at a loss because of depreciation.  Assuming you have a decent income, you'll just carry over those losses as PAL.

Seeing that you will be in a 2family, the deductible expenses are generally split in half.

Hope that helps.  Good luck.

@Account Closed Your company's website shows you as the Chief Technology Officer.  How many returns have you seen?  Or you actually do double duty as an accountant preparing returns?

maybe I didn't look into these products enough, but it really felt that I was really playing a "net interest margin" game.  Since I'm not a bank, it didn't seem worth it to me.  Non of the sales people could understand or provide an explanation / counter.

@AnnMarie Bacchus okay. Just realize you do need to learn to operate the LLC property to maintain its corporate veil.. That is a legal matter, but still has "accounting" elements in it since something such as co-mingling funds will pierce your corporate veil. Not having your bookkeeping in order doesn't help either.

Good luck.

@James Robert if you are flipping, even if you hold the property for 1yr, the profit is still taxed as ordinary income.  You need to show true intent and activity that its an investment property.

So, flipped property is treated as dealing in inventory, not investment property.  As such the profit is taxed as ordinary income subject to self-employment tax.  Its not capital gains tax at all.

So, none of what you just replied to technically works.

Of course, consult a qualified professional...  But, we've been saying this on the boards all the time.

Back to your $300k..  Well sounds like you'll be saving ~12% and ~2pt per deal by using your own money.  Unless you think your home will appreciate faster than that, it could be a way to go.

@Jeffrey Richard

What "experts?"  In what?  The "influencers" / "youtubers" etc. are making money, in my opinion, providing entertainment so they can get as many views as possible.  Its easy for them to tell you how to invest in real estate since none of their money is on the hook.