All Forum Posts by: Austin Cheatham

 Nope! Usually taxes, maintenance, and fees are deducted in the year they occur. You could have made the choice to capitalize them but likely not. I'd check with your accountant on that to see where your basis is at. He should have that information from your return. It may also be in your tax return. Sometimes those schedules are included but sometimes they're not. 

So the taxable amount would be:

Sales price

Add: any improvements capitalized

Less: original purchase price

Less: any depreciation taken

So let's say you had a house you bought 17 years ago for 100k. You remodeled it at some point and added a new roof and HVAC system and that was all in for 50k. So now we're all in total basis of 150k. Over those 17 years we took depreciation on all of this things, and across those 17 years lets say we took 75k in depreciation. Now our basis in our house is 150k purchase and improvements less 75k depreciation. So basis is now 75k. That house sold for 200k. Your taxable gain would be the 200k-75k=125k. You would have depreciation recapture on the items you depreciated (75k), taxed at ordinary income rates and then any of the actual property appreciation would be taxed at favorable capital gains rates (50k). 

1031 exchange will allow you to defer all of that gain as long as you meet conditions.

That can typically be structured pretty easily with a will. You could also create a trust but that comes with a little more administrative burden than a will. Not an attorney, but working in tax for several years and have seen people do both.

$250 an hour can be pretty standard for consulting. However, I usually include tax planning with my tax preparation fees and do not charge separately for the two. So if I have a client who pays me for tax preparation, that fee includes planning as well. I believe that in order to efficiently do tax prep then we need to be doing tax planning as well.

Yes on the cost seg piece (for the most part). While you can try and do a DIY cost seg, it is very tricky to understand the tax law piece and the engineering/construction piece. That is something I generally refer out for my clients to cost seg professionals. 

And no, you do not have to use a CPA. It is not required. You can file your taxes anyway you would like. Is it going to be the most effective way to maximize tax deductions and correctness? Likely not, but if you don't mind taking the risk and spending a little extra in taxes (from missing possible deductions or misunderstanding the law) then that's ok. But in my experience I've found that often people who come to me after doing their own had been doing it wrong, or missing out on some deductions. I would rather see someone pay a tax professional a fee and possibly save money on taxes rather than run the risk of paying extra to the government.

You can do it yourself, for sure. But is that the smartest option? I would say likely not. In my experience when I have seen people do their own taxes, they're often wrong or missing some big deductions that they didn't think about (or know about). So the question becomes, do you want to try and do it yourself, take the risk to save a few bucks but possibly cost yourself thousands in taxes or is it better to sync up with a tax pro now and start correctly to begin? 

With two rental properties, it will be no where near thousands or even thousand for tax prep. And the savings a tax pro can provide can easily outweigh the costs.

I would recommend reaching out to some here on BP and see if they are accepting new clients.

You've came to the right place to find a real estate focused accountant. There are several on the forums. I would look around and see who is providing value and reach out and see if they can assist.

I can provide any help with a local Florida CPA but someone else might. I just wanted to pop in and say while it can be great to have a local CPA, I am a big advocate for working with remote CPAs. Often a remote CPA can provide cost savings if you go with a lower cost of living area and more expertise in a certain area than someone local. There are several remote real estate focused tax professionals here. Technology has really came a long way and working remotely with someone is super easy. Here on BP we're not allowed to promote ourselves directly on the forums. I would look and see who is providing value here, reach out and see if they are accepting clients. Best of luck on your search!

Welcome to the journey! While it can be great to have a local CPA, I wouldn't hesitate to consider a remote CPA based out of a different city/state. Often a remote CPA can provide cost savings if you go with a lower cost of living area and more expertise in a certain area than someone local. There are several remote real estate focused tax professionals here. Technology has really came a long way and working remotely with someone is super easy. I would look and see who is providing value, reach out and see if they are accepting clients. Best of luck on your search!

You've definitely came to a good place to find a good tax professional for real estate investing. Here on the forums we can't self promote, but like others have said, reach out to some accountants on here providing value to others and see if they will accept new clients. It may be tough finding someone to complete your taxes by the 15th, but still possible.

I agree with Jason here. We would need to see the full picture and discuss the details before being able to provide good advice. In general, yes you would need to amend each year that the depreciated items are being depreciated on. 

For example, lets say you decided to capitalize a $2,000 item over 5 years. The first year you took bonus of $1,200 and then took $200 each year for the next 4 years to get the full write off of $2,000. Well now you amend to expense the item fully as a de minimis. Well now year 1 has an extra deduction of $800 ($2,000 total) causing tax to go down that year. And year 2 through 5 now lose $200 of depreciation expense causing taxable income to go up for each of those years. You would likely want to do some sort of analysis to see if the full deduction is worth it in year 1 compared to taking a little across 5 years. Also remember the time these returns will take to amend along with the possibility of opening up audit periods/red flags with the IRS due to amendments.

Doing this yourself on turbo tax likely won't be your best bet considering all of the details. I would work with a tax professional on this situation. It sounds possibly complex. It is also likely turbo tax won't be able to handle the complexity of the situation either.