All Forum Posts by: Kyle Scholnick

@Patrick J.

@Michael Plaks

So if my business is already an S corp, it wouldn't save on self employment taxes by paying myself rent and putting it on Schedule E instead of C right?

@Nicholas Aiola

So if my business is already an S corp, it wouldn't save on self employment taxes by paying myself rent and putting it on Schedule E instead of C right? 

@Nicholas Aiola

I am aware of that, but can you share some of the highlights of the self-rental rules? That is what I was asking about, not specific numbers. Thank you

Are there any rules and regulations from IRS on paying yourself rent if you own an office building and your unrelated business uses that location? By doing that, it would put passive income on schedule E as opposed to schedule C which would decrease self employment tax right? 

Any reason not to do it? 

@Nicholas Aiola

If I own an office and my business works out of that, is it generally better to just put it on schedule C or pay myself rent and put on schedule E? Seems like one could avoid some self employment tax by putting it on schedule E, but does IRS have any restrictions on that kind of thing? 

@Nicholas Aiola

Are there any real estate crowdfunding platforms that allow you to deduct your investment against active income (similar to oil/gas)?

@Nicholas Aiola

Hey Nicholas, 

I am trying to consider all tax consequences of renting out my home as a house hack. Am I missing anything here or not accounting for something?

I own a 600k home so I will assume maybe 400k would be depreciable 

so 400k/27.5 = about 15k per year depreciation, +$7000 property taxes + $1000 insurance + $6000 utilities/lawn/maintenance = $32k total deductions

If I stay in 10% of my home and rent out the rest for $1000 per month that would give 12k of income per year
Minus the $32k in deductions would give a loss of $20k per year which I believe I can only take if my taxable income is under 150k right? 

But that 20k in loss if I could take it lowers my taxable income by 20k which including federal/state/self employment tax would be a savings of around 30% or $6000 tax savings per year.

If I did this for 10 years I would get tax savings of about $60,000 total plus the 12k per year of income or 120k so 120k +60k = 180k 

Now lets say I sell the house in 10 years and had a 250k gain.

Because I used this as an investment property I would owe tax on the gain of 15% so about 37k and then depreciation recapture of (150k total depreciation taken over 10 years x 25%) of about 37k

so my total gain would be 180k per year above + 250k appreciation for a total of $430k - 74k in capital gain and depreciation recapture = 356k total gain
compared to if I didn't house hack I would have basically a tax free 250k gain due to 

Did I analyze this correctly? Did I account for everything? Or I guess the only difference would maybe be since I live in 10% of the home, instead of 32k total deductions per year it would be 90% of that or about 29k per year right?

Are the calculations for depreciation recapture correct? 

Also, what if I owned the home for 20 year, but only rented it out for 10 years...would all the capital gains be taxed or is it some how pro rated for only 10 years? 

Lastly, the main ways to avoid the depreciation recapture and capital gains tax would be to do a 1031 exchange or basically die and leave everything to my heirs who would have a step up basis? 

Thanks so much!

@Ian Ippolito

Excellent comment Ian, I totally agree. I think with crowdfunding, these turnkey providers will start to significantly decline in demand. Most of them are too selfish and as you stated they rob all the profit from the buyer. 

I think the only way for turnkey to survive is for them to up their game significantly and decrease the profit they take on the rehabs. Otherwise crowdfunding seems to be the future for the passive investor. 

There is barely any profit in turnkey to begin with. The only "advantage" one could say about turnkey is you get some tax benefits, but you get those same benefits with crowdfunding, it is just already built into your return. 

What is your opinion on the big crowdsourcing platforms for real estate investing now vs Turnkey? 

This is not a question about active real estate rentals or flipping or wholesaling, I understand those are better returns for the right people. 

But for the more passive real estate income people, what are your thoughts on this? Any difference in returns? Much less hassle with crowdsourcing now? Any reason to continue with turnkey? 

How can you tell if anything in a condo unit is gas powered vs electric, such as the HVAC or water heater? I spoke with the electric company and they didn't know. Seems like this info is passed from seller to buyer for decades, but if seller can't be contacted, what is the best way to find out? 

What other utilities need to be serviced in a unit? Electric I got....trying to find out about gas via this post....water is included in HOA...what other utilities/service providers should I be checking for? Thank you.