All Forum Posts by: Account Closed

Can someone please recommend good property management companies in Gary, Indiana.

Additionally, has anyone invested in Gary, Indiana? Can you share your experience(s). Anything I should be aware of.

Thanks.

Generally, you can deduct travel expenses directly related to your rental property business. This includes transportation costs such as gas, airfare, rental car fees, and lodging expenses while away from home. Keep receipts and records to substantiate these expenses.

The IRS allows you to deduct 50% of qualifying business-related meal and entertainment expenses. To qualify, the meal or entertainment must be directly related to your business or associated with the active conduct of your real estate investment activities. So, if you're discussing business matters with your property manager or realtor during a meal, those expenses could potentially be deductible.

Be mindful of distinguishing between personal and business expenses. While meals directly related to your real estate investment activities may be deductible, meals that are purely personal in nature are not.

Generally speaking, you may be able to offset the gain from the property in Illinois with the losses from properties in other states, resulting in a net loss for tax purposes. This could potentially reduce or eliminate your state tax liability on the property with a gain. 

Nonetheless, the rules regarding how losses can be used to offset gains can vary by state, so it's advisable to reach out to a professional tax advisor that can recommend solutions based on careful examination of your situation. Thanks.

Nathan -

It's understandable that you want to optimize your tax situation by strategically utilizing your capital losses. Here's how the treatment of capital losses typically works:

1. Netting Capital Gains and Losses in a Tax Year: In a given tax year, you first net your capital gains and losses. This means you subtract your total capital losses from your total capital gains. If your losses exceed your gains, you have a net capital loss for the year.
2. Offsetting Other Income: If your net capital losses exceed your capital gains, you can use the excess losses to offset other types of income, such as ordinary income from wages, self-employment income, or interest income. This can reduce your taxable income for the year.
3. Carrying Forward Unused Losses: If your total capital losses exceed your total capital gains plus the allowable deduction against other income (currently up to $3,000 for individuals or $6,000 for married couples filing jointly), you can carry forward the unused portion of your capital losses to future tax years.

Regarding your question about deferring capital losses into 2023 and using them to offset capital gains in that year, yes, you can typically carry forward unused capital losses from previous years and use them in future years, even if you had capital gains in those previous years.

So, if you choose not to use all of your capital losses from 2022 to offset your income in that year, you can carry forward the remaining losses to 2023 and use them to offset capital gains you expect to have in that year.

In general, expenses related to the purchase or improvement of a rental property can be deductible, but the treatment of these expenses may vary depending on the nature of the expense and applicable tax laws. 

1. Home Inspection Costs: The costs associated with a home inspection for a rental property are typically considered part of the cost of acquiring the property. As such, they are not immediately deductible as an expense in the year they are incurred. Instead, they are added to the property's basis, which affects the property's depreciation over its useful life. You can recover the cost of the inspection over time through depreciation deductions.
2. Sewer Inspection Costs: Similar to home inspection costs, expenses related to sewer inspections for a rental property are usually considered part of the property's acquisition cost. Therefore, they are added to the property's basis and recovered through depreciation deductions over time.
3. Appraisal Costs: The costs of obtaining an appraisal for a rental property may be treated differently. While appraisals are typically associated with the purchase or refinancing of a property, they may not necessarily be considered part of the property's basis. Instead, appraisal costs may be deductible as a current expense if they are incurred for the purpose of determining the property's fair market value for a specific business purpose, such as refinancing or appealing property tax assessments. However, if the appraisal is conducted as part of the property acquisition process, it's likely considered part of the property's basis.

It's important to keep detailed records of these expenses and consult with a tax professional to ensure proper treatment on your tax return. They can advise you on the specific rules and regulations that apply to your situation and help you maximize your deductions while staying compliant with tax laws.

Reporting each property separately on Schedule E is generally the correct approach, as it allows you to accurately capture the income and expenses associated with each property. However, the method of handling the 1099 income on the tax return may vary depending on the circumstances and interpretation of tax laws.

The approach your CPA has taken, where each property is reported separately on Schedule E and then adjusted on a statement for property 3 to match the total 1099 income, could be viewed as a cautious approach to ensure compliance with IRS reporting requirements. By showing the full 1099 income on the return, it helps mitigate the risk of IRS flags or inquiries related to unreported income.

However, it's worth noting that the IRS typically matches 1099 income reported by payers to the income reported on taxpayers' returns. As long as the total income reported on your tax return matches or exceeds the total income reported on your 1099s, and you have documentation supporting the breakdown of income by property, the risk of audit or inquiry may be relatively low.

Pros of the approach:

1. Compliance: Helps ensure compliance with IRS reporting requirements by matching the total 1099 income on the tax return.
2. Risk mitigation: Reduces the risk of IRS flags or inquiries related to unreported income.

Cons of the approach:

1. Complexity: Requires additional documentation and statements to reconcile the reported income with the 1099s, potentially adding complexity to the tax return.
2. Time and cost: The additional work required to prepare separate statements for each property may result in higher accounting fees.

Ultimately, it's essential to weigh the pros and cons and consider the specific circumstances of your situation. Consulting with your CPA and discussing any concerns or questions you have about the approach can help ensure that your tax return accurately reflects your income from rental properties while minimizing compliance risks.

10 days away! Anyone still find themselves needing help?

The method for calculating property tax amounts for rental properties can vary depending on local tax regulations and practices. However, typically, property taxes are based on the assessed value of the property and the applicable tax rate.

In your example, it seems you're referring to the timing of payments rather than the calculation of the tax itself. Generally, property taxes are assessed annually based on the property's assessed value for that particular tax year. So, for filing property taxes for the year 2023, you would use the amounts paid during that tax year, which would be $5200 + $5500 = $10,700.

However, if you're encountering conflicting advice from different CPAs, it's advisable to clarify with them the specific regulations and practices governing property tax filings in your area. They may have insights into local nuances or regulations that could affect how payments are accounted for. It's important to ensure compliance with local tax laws and regulations to avoid any potential issues.

1. The decision to use Schedule E or Schedule C for reporting rental income from house hacking can depend on various factors, including the nature of your rental activities and how you've structured your rental business.
   • Schedule E is typically used to report rental real estate income and expenses for individuals who own rental properties as investments or passive income sources.
   • Schedule C, on the other hand, is used for reporting income and expenses from self-employment or business activities, including activities that are considered to be actively managed.
2. The interpretation of the tax code and the determination of which schedule to use can vary based on individual circumstances and the tax preparer's expertise.
   • Your tax preparer may reference relevant sections of the IRS tax code, such as IRS Publication 527 (Residential Rental Property), IRS Publication 334 (Tax Guide for Small Business), or other applicable publications and regulations.
   • Factors that might influence the decision include the level of involvement in managing the rental property, the intent to generate passive income versus active business income, and the structure of your rental business (e.g., sole proprietorship, partnership, LLC).

Ultimately, it's essential to work with a tax advisor or accountant who understands your specific situation, goals, and the nuances of rental property taxation. They should be able to provide personalized advice and ensure compliance with IRS regulations while optimizing your tax strategy. If you're unsure about your current tax preparer's expertise in this area, it may be worthwhile to seek a second opinion or find a tax advisor with more experience in rental property taxation and house hacking scenarios.

Plenty of Tax Professionals on this forum who serve Florida.