All Forum Posts by: Jay Patadia

Stephen,

You get tax deduction on all except mortgage principle. Principle payment is not tax deductible. On top off all expenses you have listed, you can also take deduction for depreciation on your rental property.

You can take other deduction like property management expenses, auto mileage incurred related to rental property, home office deduction etc.

That 10% property management can be treated as Guaranteed Payments to partner. Guaranteed payment is a specific term in the Internal Revenue Code, which is defined as payments to a partner to a partner capacity for services or the use of capital if determined without regard to the income of the partnership.

Please let me know if you have any other question.

Sales commission paid to realtor to will be added to the basis. If repairs doesn't improve the quality or increase the life of asset will be treated as operating expenses of the property. Installing new roof or HVAC system will increase basis. Merely re-painting wall or fixing door knobs are operating expenses and do no increase basis. Consult your accountant to know the specifics of repair vs improvements expenses.

As per IRS, property is in service in a rental activity when it is ready and available. One of the way you prove that property was available, is to advertise it for rent. During repair period was your property being advertised for rent? If yes, then you can deduct those operating expenses (painting, subfloor repair, HVAC maintenance, locks, door handles, ect), if not then you can not and need to add to the basis of the property and depreciate it.

Sam,

To determine that first you need to see what is the basis of the property? were your parents taking depreciation deduction (reduce basis) or any major improvements(increase basis). Gain/Loss is calculated based on Selling Price - Basis.

Yes he should be. Also ask is he/she currently invests in real estate. 

Nicholas,

This is not a second home of yours. You can deduct all the interest paid for mortgage under schedule E of Form 1040 tax return form. Rental income and expense go to Schedule E and tax payer can deduct all interest paid for the rental property mortgage. You don't have to live there to deduct mortgage interest. Please talk to your tax accountant to plan out the strategy on deductions you can take on your rental property.

I hope I have answered your question.

Joseph,

LLCs are great from liability stand point. With multiple properties in your bucket, you should consider to keep these properties in LLC. You can transfer deed's on LLC's name and show property income and expense under LLC. IRS can raise a question on property not being under LLC's name for which income and expenses are being shown. Yes you can deduct necessary and ordinary expenses (inspection for other properties) under LLC.

Creating LLC and and transferring deeds won't take that long but please check with your title company for deed transfer period.

Brendan,

Please see link below. It will get you started.

https://www.khanacademy.org/economics-finance-doma...

Please let me know if you have any other questions.

@israel R., I don't feel like you need to use someone local. In today's age, most of the CPAs use Skype or other web meeting software for clients meeting.

Good starting point to look for local CPAs are yelp, google, local chamber of commerce and state accounting society.

Key here to look for professional with real estate side of tax planning and preparation experience.

Let me know if you have any questions.