All Forum Posts by: Austin Cheatham

That is not correct as to my understanding of the tax law. Passive activity loss rules still apply to activities inside a partnership. A partnership is a pass through entity. So while the partnership may show a loss, the loss would be passed through to your personal return and then be subject to passive activity loss rules.

The partnership only creates more of a headache as there will be additional tax filings and fees for creation and ongoing support.

Activities inside a partnership are not necessarily taxed any differently than if they were reported on your personal return. It is a pass through entity meaning the partnership does not pay tax at the federal level. It is simply an information return filed to the IRS showing income/expense/etc that is then reported on your individual return in the same manor it would be without a partnership.

Here on BP, we're not allowed to directly self promote. But there are a ton of great accounting professionals on here to reach out to for these services. I'd reach out to some people providing value and see what they can offer.

I'd typically ask about their experience and what types of clients they handle. I think it's more important what questions they ask you, rather than the questions you ask them. Someone who is asking you questions to get to know you and your business will likely be better than someone who doesn't ask any and just takes on the work.

It's hard to say what the costs will be like and it is sort of up to you and the level of service/quality you want. It also depends on the complexity of your needs. It is just like shopping for everything else. I would aim to find a good medium between quality and price.

You're able to take partial depreciation by placing it into service before the end of the tax year. So they could get some of those depreciation benefits this year rather than waiting to take those benefits in the following year. Dependent upon your tax situation, you could also be able to take some expenses in the current year as well which also provides more benefits than waiting for the next. Money now is always better than money later.

1. Learning the basics of property-related tax on your own can be helpful, especially if you’re interested in the long-term benefits of real estate investing. You might be able to manage without a CPA initially. However, a CPA specializing in real estate can offer insights that may help you avoid common pitfalls and optimize deductions early on. If you’re planning to expand your portfolio or want to maximize your understanding, consulting with a CPA upfront could set a solid foundation.
2. Your understanding is generally correct. Expenses that exclusively relate to the rental unit are 100% deductible, shared property expenses (like mortgage interest, insurance, and common area repairs) are typically 50% deductible, and personal residence expenses aren’t deductible. 
3. Improvements, like a remodel in the rental unit, are usually considered capital expenses and need to be depreciated over time. You can’t deduct the full cost in the year you make the improvement, but you would depreciate it over the useful life of the improvement (usually over a period specific to the type of asset, like 5, 7, or 15 years, or over 27.5 years for residential property improvements). You can look into a cost seg study to accelerate some of this depreciation.
4. Beyond the basic deductions, keeping a detailed record of shared expenses and understanding the split-use rules can maximize deductions.
5. For house hacks, depreciation is typically taken on the rental portion only (50% in your case). Depreciation recapture upon sale would apply to the portion of the property you depreciated. Using a strategy like a 1031 exchange can help defer this tax if you reinvest the proceeds into another property.

I think you need to ask yourself "why do I need a holding company?" Will this optimize your tax position or legal position? You could be creating unnecessary paperwork, headache, admin responsibilities, etc.

This is more of a legal question, but typically I would think for a holding company you would want to list yourself as the manager of the holding company. And then have all of your other LLC's be members in the holding company (if that is what you're trying to achieve).

Great explanation. I have worked with people who are credentialed who are great and some who are not so great. I have also worked with people who have no credentials at all that are super intelligent. Typically the exams to receive credentials are not a test of intelligence or knowledge, they are more a test of discipline. Being able to sit down and be disciplined to study. Many people have a credential and use maybe 20% of what they learned when studying for it. Experience trumps all.

They have answered your question pretty well here, but I would just be sure to track your basis very carefully when looking to doing multiple 1031 exchanges with depreciation. This can get pretty complex, pretty quickly, so just keep that piece in check for audit documentation and make sure you have good records on all of it.

So typically passive activity losses are grouped together and carried forward to offset other passive activity losses if your income is over 150k. So if you had 3 rentals with losses and 2 rentals with gains, the losses from the 3 rentals would offset the other 2 rentals and the rest of the loss would be carried forward to offset other passive activity losses in future years if applicable. It is not rental specific, rather it is specific to passive activities.

If you take a cash-out refinance from one rental property and use that money to pay off another rental property’s mortgage, the IRS looks at how you use the loan. Since the money is still tied to your rental business (paying off another rental), the interest on the new loan would usually be deductible as a rental expense. This means you can likely deduct the interest on your taxes because the loan is connected to your investment properties.

Tons of knowledgeable CPAs on here. You've came to a great place. Accountants are not allowed to directly promote themselves here, so I would look around for some providing value on the forums and reach out to see if they're accepting new clients.