All Forum Posts by: Jason Malabute

I recommend starting by contacting the county’s property tax office to determine if they are open to discussing or reviewing an appeal for property taxes. Based on my experience, it’s often not worth the time and expense because appeals frequently lead to no change in the tax assessment. However, as Zane mentioned in his response, another option is to consult with a lawyer who specializes in appealing property taxes. They can evaluate your specific case and guide you through the process effectively

Michael’s articles are excellent and provide valuable insight into taxes for syndication deals. As a CPA and real estate investor who is a general partner in two syndications, I want to share some practical advice to set realistic expectations. While preferred returns sound appealing, they are often not realized as monthly cash flow. This is because value-add properties, especially those built in the 1960s to 1980s, typically take a couple of years to stabilize, particularly in today’s market conditions. As a result, you are more likely to receive the preferred return when the property is sold. You probably won't get distributions during hold.

Syndications are generally tax-efficient, and Michael highlighted several key aspects. K-1 losses, generated through depreciation and cost segregation, can often offset distributions during the hold period, minimizing taxable income. However, it’s important to account for depreciation recapture at the time of sale, which can affect your overall tax liability. Additionally, considering the time value of money is crucial, as deferred gains and tax efficiencies may improve long-term returns despite upfront losses being largely on paper.

Here’s a concise response for the post:

As a CPA who’s been doing accounting since 2013, I always recommend QuickBooks Online for real estate investors because I find it to be the most user-friendly. The only time I suggest other software, like AppFolio or Yardi, is if you’re managing larger, more sophisticated commercial multifamily deals. Otherwise, QuickBooks Online works great for most needs. Just my personal experience and opinion!

While the idea of a DIY cost segregation study might seem appealing to save costs, I would advise against it. Proper asset classification requires technical experience and knowledge to ensure accuracy and compliance with tax regulations. Even small errors in this process can lead to challenges with the IRS or missed opportunities for deductions.

I strongly recommend hiring a professional to handle the cost segregation study. This approach ensures everything is done correctly and maximizes your potential tax benefits. That said, before proceeding, I suggest taking a step back and starting with tax planning. It’s crucial to confirm that you qualify as a real estate professional under the tax code. Without this designation, you may not be able to offset your W2 income with the passive losses generated from the cost segregation study.

I’d hate to see you spend money on a study only to find out later that the results won’t effectively reduce your tax liability.

Hey Steven,

I’d recommend reaching out to your county assessor to inquire about the increase. However, just to set expectations, they most likely won’t make any changes unless there’s a clear error in the valuation.

That said, since the $1,000 increase works out to about $83 per month, I’d suggest checking what the market rents are in your area. If they support a rent increase, you could look into raising your rents by that amount to offset the cost. And if you do manage to get a property tax abatement or some relief from the assessor, that’d just be icing on the cake.

Good luck, and let us know how it goes!

Hey Marc, this is a tough situation and a good reminder to always have a contract in place for any business dealings. I’d recommend consulting with a lawyer who specializes in contract law to understand your options and how to protect yourself moving forward.

When it comes to being a real estate professional, it actually doesn’t have anything to do with your job title or profession. For tax purposes, it’s about whether you pass the 750-hour rule, the 50% rule, and meet the material participation requirements. If you qualify, you can use passive losses, like those from depreciation, to offset your active income. That’s the key benefit.

As for the cost segregation study, whether or not it makes sense really depends on your tax situation. The main reason to do a cost seg study is to generate bonus depreciation, which creates passive losses. If you don’t qualify as a real estate professional or don’t have a way to use those passive losses to offset your active income, then spending the money on the study might not be worth it. That’s something you’d want to figure out through tax planning.

Regarding the 1031 exchange, bonus depreciation doesn’t affect whether you qualify for one. But here’s something to keep in mind: when you sell a property, you usually have to deal with depreciation recapture, which is another type of tax. If you do a 1031 exchange, you can defer both the capital gains tax and the depreciation recapture, which is a nice benefit.

Thank you for sharing this important update about the Corporate Transparency Act and its BOI filing requirements. However, as Michael Plaks pointed out, based on the most recent federal court order referenced on the official FinCEN website, reporting companies are currently not required to file beneficial ownership information with FinCEN at this time. This means there is no liability for failure to file while the order is in effect.

As long as you paid a contractor or someone who’s not an employee $600 or more in a tax year, you are required to issue them a Form 1099, regardless of whether you paid them via cash, check, or another method. The key factor is the amount paid and the nature of the payment, not the payment method.

Like what Joshua said, purchase price, closing cost, and agent fees are capitalized. Normally seller pays buyer agent fees