All Forum Posts by: Jason Malabute

You don't need an LLC in order to claim depreciation on the property.

Yeah, it’s key that your CPA is staying up to date with our “One Big Beautiful Bill” Act and all the new tax laws, since those are changing every single year. You really need somebody who is passionate about tracking these changes and applying them to your specific situation, otherwise you could be leaving a lot of money on the table.

It really depends on your overall tax situation. If you’re able to use passive losses to offset your active income, then doubling down on cost segregation and bonus depreciation might make sense. But if you can’t offset active income with those passive losses, then the benefits are limited and the investment probably isn’t worth it.

For tax purposes, when you live in one unit and rent out another, it’s really treated as if you own two separate properties: one personal and one rental. The personal side is handled like a primary residence, meaning your share of mortgage interest and property taxes can only be deducted if you itemize on Schedule A, and if you take the standard deduction, you likely won’t see a benefit. Personal expenses like your own utilities aren’t deductible. The rental side is reported on Schedule E, where you can deduct all the expenses tied to that unit. Shared expenses such as insurance or roof repairs are usually divided based on square footage or number of units, while costs that only apply to the rental are fully deductible. You’re also able to take depreciation on the rental portion of the property, but not on the part you live in.

It really depends on your situation, but for the most part, putting a property into an LLC is more about liability protection than tax savings. By default, a single-member or husband-and-wife LLC is a "disregarded entity" for tax purposes — meaning the IRS still treats it the same as if you owned the property in your own name.

If you’re selling a property to buy one or two more, you should consider whether a 1031 exchange makes sense. If you already have enough passive losses carried forward, you may not need to use a 1031. The best move is to run the numbers with your accountant.

You can exclude up to $250,000 of gain if single or $500,000 if married filing jointly on the sale of your primary residence, as long as you’ve owned and lived in it for at least 2 out of the last 5 years. In addition, your basis can be increased by capital improvements you’ve made over time (like remodels, additions, or a new roof). If one spouse has passed away, there’s also a potential step-up in basisthat can reduce taxable gain.

If you sell your primary residence, you may qualify for the capital gains exclusion under Section 121. The rule allows up to $250,000 of gain excluded if you’re single and up to $500,000 if you’re married filing jointly. To qualify, you generally must have owned the home and used it as your primary residence for at least 2 out of the last 5 years before the sale. You can only use this exclusion once every two years.

When you record closing costs, make sure you treat them as an intangible asset and spread them out over the life of the loan. If you refinance later, you can then deduct in one shot any of those costs that haven’t yet been written off. Be careful not to count escrow deposits as part of closing costs, since those are just deposits and not deductible expenses. Many real estate investors miss this deduction opportunity.

The cash you receive from a refinance is not taxable income because it’s loan proceeds that must be repaid

No. The cash you receive from a refinance is not taxable income because it’s loan proceeds that must be repaid