All Forum Posts by: Brandon Hall

@Shawn C. the cost of adding the advertising to the car is deductible (signs, labor, etc) but just because you add advertising to the car does not make the use of the car a deductible business expense.

Here's a tax court case where a dental practice was challenged by the IRS on this very issue. The IRS won.

http://www.ustaxcourt.gov/InOpHistoric/WILLOCKC.TCM.WPD.pdf?_ga=2.242373953.2119717688.1502723604-1431854774.1498610952

@Eric Peterson the De Minimis Safe Harbor allows you to expebse rather than capitalize repairs, maintenance and improvements under $2500 per item on the invoice.

That said, if all items are target one Unit of Property, then you take the aggregte value. An example would be an HVAC replacement - you can't divide the cost of the labor and parts to get each items below $2500. Instead we look at the total cost of the repair for that UOP.

I recommend the Pro (or Plus?) version. The one that allows class tracking. As you scale, you will be quite thankful for the class tracking.

Don't use desktop. QBO integrates with so many apps that you can almost fully automate your bookkeeping if you put some time into it. Not to mention you can also utilize Zapier for further app integrations. QBO is the way to go. 

Don't think "cheapest option" - instead think "best value." Trust me, you'll spend much more time tinkering with the cheap option than you will with the class tracking option. The added value is significantly greater than the added cost.

@Fred Mejias if you are going to be a landlord, you are in a grey area. Technically, there is not an official ruling/requirement for landlords to issue 1099s. However, to cover your bases, you may want to.

In order to issue a 1099, you will need the vendor to provide you with a W9. You do nothing with the W9 except keeping it on file. You do not issue a W9 to the contractors. 

The W9 gives you the information you need to issue a 1099 at year end.

The rehab will likely be considered a capital expense and depreciated. There are tricks to get around this which is why you DO need a CPA :)

@Craig Curelop you pay SE taxes on net income when AirBnB is reported on Sch C.

@Luke Carl are you referencing the passive losses? You can have passive losses while still seeing a profit. A passive loss is a tax item. For instance l, you can net $5,000 but due to depreciation show a net loss for tax purposes of $1,000.That's why I love rental real estate. 

One of our clients nets/cash flows $300,000 a year. This client paid around $4k in total taxes last year.

@Luke Carl wife as realtor means she can qualify for the RE Pro status. But that's only beneficial if you have passive losses.

@Andrew Magoun what was the total cost? If greater than $2,500, it's capex. If less than $2,500, the De Minimis Safe Harbor will apply.

We report maintenance in accordance to the new Maintenance Safe Harbor rule which says something along the line of "if you expect to perform the repair twice within a ten year period, classify the repair as maintenance."

@Kevin Sapp gifting will not alleviate basis issues. The current basis will be transferred to the giftee and will not be stepped up.

@Dan Schwartz yes, manage with an S or C Corp to siphon profits and reduce SE tax exposure. Even better if spouse can wholly own The Corp.

@Chris Mason I'll call you when the CPA business gets boring :)

@Luke Carl we go over a few strategies with our clients but we also tell them not to sacrifice profits for tax maneuvers. So for instance, if the duplex thing will negatively impact occupancy, don't do it. We'd rather you make money and pay taxes than not make money and be tax free.

@Chris Mason @Luke Carl there is no flexibility for Sch C reporting if your average rental period is less than 7 days. The IRS deems you to be operating a hotel or BnB business. As such, you must report as those businesses would report.

If you can push your average rental period above 7 days and NOT provide substantial services, you have flexibility of reporting on Sch E. What are substantial services? What if a property management firm is the one managing it? Great questions. All of which will soon be audited and trialed in court.

I foresee a ton of AirBnB folks getting their a** handed to them by Uncle Sam over the next few years. Mass market BnB is relatively new due to AirBnB. Millions of people are incorrectly reporting this stuff per current guidelines.

If you see it, point people to resources where they can learn about their position and determine whether or not they are incorrectly reporting. Otherwise it's going to hurt once the IRS knocks on their door.

Our firm presses boundaries and plays in the grey area. But we only do so when we feel we can make a compelling argument to support a tax position.

One thing you can do - buy multi family instead of a single family. Then (assuming a duplex here) rent one unit on a 12 month lease. Rent the other unit on AirBnB. Doing so pushes your average rental period above seven days as this is looked at on the property, not unit, level. And you still get the increased rents due to AirBnB.