All Forum Posts by: James Defazio

Thanks for the advice Richard! We love doing Airbnb but unfortunately have been shut down by our city because of zoning violations. Apparently I am unable to list my property for short term rent unless I want criminal charges filed against me. So until we buy another property in an area that allows short term rentals we will have to only rent out on yearly contracts and wait for homeaway and Vrbo but thank you for the suggestion and we’ll definitely look into listing on there when we able. 

thanks so much for the info. I don’t 1099 my wife although I probably should. She also does not receive a paycheck per se we just use it as additional business income.  I will most likley not use her as an employee. I’ll probably just count the cleaning income as Airbnb income. But I have heard that that is something I can do to alleviate some of the income since she really does do all the cleaning just as I would pay someone to do. I just invested in quickbooks to help me prepare well for tax time and track everything and be organized and have clean books and I think The next step is probably a cpa? 

I thought I read somewhere that If it is your first year as being self employed only that you might get a pass from the IRS and not pay penalties? I hope so! 

I did a major remodel on the Airbnb Property and some of it will definitely qualify as legit expenses but most of it will need to be depreciated probably so it probably won’t help offset my income much eh? 

Thanks for the help! 

I honk federal tax withholding is throwing me off since I don’t get a w2 this just means I don’t have any tax withholding and I haven’t paid any estimated taxes yet so the answer to 2 and 3 would be no? Last year I had some federal tax withholdings with a few months of w2 income. So this year will not be at least 100% of last years withholding? Am I understanding this right? 

thanks for the reply! I also read that and questions 2 and 3 confuse me a bit and maybe I just need them rephrased a little or possibly explained in a little better detail in layman’s terms. The answer to question 1 is I’m not actually sure. I might owe less than 1k as I have a ton of expenses I can write off and with credits that I’ll qualify for I don’t really know? So I’m not sure how to answer that one! 

So this is the first year that I have not had a traditional job and w2 income to show at tax time as well we own 4 rental properties (one in which we live in one side of a duplex). We also did a short term rental on Airbnb on the other side of the place we lived in and the other properties are all rented on yearly contracts. As such I operated the entire year under the assumption that I have had in the past with properties that I just add up my expenses and income at the end of the year and my adjusted gross (usually very little if I use all my qualifying write offs) and pay the tax on the adjusted gross income.  

However, in preparation for tax time I was reading up and found that Airbnb rental income is not considered passive income and is actually considered self employment income and subject to self employment tax and that I might need to pay quarterly estimated taxes on both Airbnb income and my traditional rental properties? 

The Rental properties will make approximately 20k after write offs and Airbnb will most likely be about 15k after tax write offs. I am married with a child dependent and my wife is an employee of our business  as she does the cleaning at the Airbnb rental and we file jointly. Have I missed the boat on the quarterly payments? I had no idea if I needed to do that. Any help would be greatly appreciated. Thanks! 

thank you for the replies everyone! Karen, I will definitely keep those options in mind and i have been actively searching for something to 1031 up into for some time now. Unfortunately I am limiting myself to my local area where I can manage the property myself. Plus I know the local markets I have lived in and know the areas to buy and the areas to stay away from so I am quite nervous to 1031 into something far away where I can't manage It and have no idea what Kind of area it is in. I have thought about leveraging into 2 properties with a loan On both properties but don't think I am able to qualify for a traditional mortgages yet which is why I was thinking commercial loan. 

hey Jason, thanks for the response. After looking into it and talking to some intermediaries on here it is my understanding (please someone correct me if I'm wrong) that as long as neither Property is owner occupied and both are being used solely as investment properties, they are like kinded investments and able to do a 1031 exchange. I have not located a property I would like to exchange it for yet so unless that happens it won't get very far at all :) 

I currently own 4 properties. 2 single family houses and 2 duplexes. All of them cash flow positive. The first Property I ever bought was a little 2 bedroom property in a nice area. It is paid off and has never seen a vacant month in 4 years. The problem with it is the rent I am not sure if it is worth it to keep the money locked up in it. I get $750 a month in rent but after tax and insurance I probably only make about $625 a month. Is it worth it to keep 100k locked up in a property that only makes like 7500 a year? 7.5% return on my money doesn't get me excited and that's if the entire year goes by without having to spend a dime on repairs (doubtful). My problem is, since 2 of my properties are paid off and the one that we live in we Rent on short term rental and make about 25k a year on top of the mortgage, we have made our business our full time job. This is fine and dandy until we tell our mortgage broker that we are self employed...what a nightmare. 

Should we look into a 1031 exchange on a commercial loan for our under performing property? We aren't able to do a cash out refi yet until we can show 2 years of Airbnb income on taxes (that will happen this coming September) should we just continue to save up money and pay off debt (our car loan) until we can qualify for a new loan and just continue to rent out the underperforming Property? What do you all think? 

good thing to think about Shaun thank you! 

update on things; she is still supposed to move out 22nd of April and has yet to pay her $193 that she owes me for her portion of rent for the prorated rent amount that section 8 does not cover. Obviously, that will come out of her security deposit but with her smoking in the property and breaking the lease a month into it even though we both signed to break the lease, would she also forfeit the other $300 in her deposit? I wouldn't normally have a problem returning deposit in full but with problem tenants who damage the property and don't pay their rent I am inclined to keep the entire deposit...thoughts? Thanks everyone!