All Forum Posts by: Benjamin Weinhart

I'll add my personal process. Something that I've found that works well is to charge a 25% deposit for the estimate I give if the total engagement is over $1,000. Just something to separate out people who aren't serious about it. I've debated upping it to 50%, but I think 25% is a pretty reasonable number due to the reason I ask for it. I haven't had anyone burn me yet and some folks even ask to pay 100% up-front to get it out of the way.

If I may, one thing I'm curious about though that you all might do is credit cards. Since I can accept payment via both ACH and CC, I've been putting a 3% surcharge on credit cards (available by request). Do you all follow this if you accept both, or just eat the CC fee? I'd have to slightly raise my fee if the latter I'd think, or maybe offer a discount for bank transfer instead.

If you own the home under the eyes of the state, you are responsible for the property tax on the home. If it's possible still, it would be better for the grandmother to keep possession of the house and have the ownership transfer upon her death due to the step-up in basis the house would get. This would get around a potentially giant tax bill when going to sell the home if she isn't otherwise subject to estate tax already. You may be able to ask for her to pay the property tax portion, but that's more a matter of opinion if you ask me.

Hi Jacob, I just wanted to give some additional clarification quickly for any who may be looking at this later for reference. STR and a qualified real estate professional have nothing to do with having two rental properties netting together. These are strategies used to use a loss to offset active income you might have from something like a W-2/1099 employment/contractor position for example. Assuming both properties are/would be LTRs, these would be netted together on Schedule E, which would flow through to Schedule 1 and/or Form 8582.

You'd also want to be aware of the potential for depreciation recapture when going to sell the property if you're not using a tax-deferred exchange. A lot of depreciation can be a bad thing if you have a large recapture event a couple years later. In my opinion, it's much better to find a property that is profitable out-the-gate and seeing the tax benefit as more of a secondary benefit.

For the pass through entity bit, a single-member LLC is actually a "disregarded entity". Pass through entities are similar, but are more commonly known as S-Corps or Partnerships where the income "passes through" to your individual return in the form of a K-1.

Depending on the state you're in, it's possible to get around SALT limitations with PTE tax by utilizing an S-Corp. Many states have adopted this but not all of them. It'd require you to rent out the property since it has to be used for business use. It can also get around state income tax too. The SALT limitation only applies to personal property (and/or individual income tax) as it's limited to Schedule A. From the general "vibe" I'm getting from you, it's possible you could find a significant amount of savings by going this route. If the property was outside of a partnership/S-Corp and on your individual return, you could get around paying property tax, but would still be subject to state income tax limitation if the business generated income for tax purposes.

As for the other question, the two properties would net together, no big deal there. The deductibility of the loss outside of real estate would depend on your level of activity with them, as well as other things you might have going on, but you'd be able to carry any unutilized loss forward indefinitely.

My personal thought on an LLC is that if you actually need the extra protection that's given by registering in a super business friendly state, you usually have someone in your ear already telling you as you grow to a large enough size for it to matter. I've worked with many restaurants/manufacturing companies with 9+ figures of revenue and they're just registered where their HQ is most of the time. This includes the biggest I've worked on who had ~$1b in revenue. For the ease of administration, I almost always advocate for someone to have an LLC registered in their home state (except for CA residents, unless you don't mind an extra $800/yr fee). No need to over complicate things while still relatively small, you can always revisit it later.

From the tax standpoint, unless you signed a contract entitling them to partial ownership or income rights on the property, you essentially gave them a gift when giving them the funds from the sale. The capital gain would be reported on your return and you'd be responsible for paying it. The capital gain is directly generated from the sale, but I could see the argument for separating it out in this situation depending on who's perspective you're looking at.

That being said, sounds like you're aware of this already. This is really a question of opinion if you ask me. If your parents didn't have any ownership rights on the property, which sounds like it's the case, then they'd theoretically be entitled to the full loan amount + market interest depending on how you guys drew everything up/what evidence there is. There's a lot of moving parts here but it sounds to me that you owe them at most the original $150k + a conservative 8-10% interest per year (well above market rate). You'll probably want to enlist the help of a CPA/EA to help out with some of the gift tax reporting as it sounds like you may have some for the year you give them the money. Ultimately up to how you want to proceed though and what you want/think your relationship with them would look like as a result.

1) The regulation 1.263(a)-(f) reads that you're able to utilize it for amounts paid during the taxable year. Effectively, if you're asking about 2024, you'd be able to take the de minimis election for appliances and such you bought during 2024 but would need to capitalize 2023 and before. Luckily for you, bonus is still at 60% for those assets that qualify for such.

2) Yes

 Yes, but the travel must only be used for business purposes. The IRS deems expenses as qualifying business expenses if they're "Ordinary and Necessary". Meaning that a portion might not be able to be expensed if you're doubling the trip as a vacation, and it can't be anything extravagant (there's a lot of nuance with this). Meals are also only deductible at 50%.

At this point with very little credit history, so long as you can remain responsible with the cards, applying for them is pretty good. Note that you can only get a chase card if you haven't applied for 5 personal credit cards in the last 24 months. You shouldn't need any secured cards if you already have a bit of history from your mom. A lot of the travel cards also don't have ForEx fees too.

Some other good cards in no particular order:

1. Capital One Savor (I believe they made this a student card)

2. Citi DoubleCash

3. Discover IT Student

4. Anything Chase IMHO

5. Amex gold if you believe the annual fee is worth it

6. Check out your local banks/credit unions to see what promotions they run. My regional bank offers a card with 1.67% cash back which is targeted towards folks without a ton of credit history.

7. A gentleman by the name of Ben Hedges on youtube is an expert on a lot of this stuff, maybe give him a watch.

Also it's important to say that while getting a credit card through a bank with FDIC insurance isn't a requirement, it says a lot about the bank itself and I don't really know of any good banks that don't have it. The ones that don't are usually more investment-related and probably wouldn't issue credit cards anyway.

I'm not entirely sure what your CPA is using as their thought process. Depending on how you set it up, it won't reduce your earned income, but there may be benefits to making the rent itself tax-free for many years or at least reduced (assuming you never recapture depreciation). If you're investing out of state, you will almost certainly be classified as a passive investor which just means you can only use (paper) losses to offset income from other rentals/passive activities.

At the end of the day though, look at the tax side of things as a nice cherry on top rather than the thing that makes a deal work for you. You can adjust this mindset of course as you get more experienced in it years later, but try to ignore the tax benefits as you're first starting out. This is the more conservative approach, and this mindset will pay dividends for you in the future.