All Forum Posts by: Laura Kreinbring

Quote from @Benjamin Weinhart:

Quote from @Laura Kreinbring:

Yes, you’re right about the “weeds”

It’s tax code weeds! lol

Us investors would throw the book right back the irs if there weren’t enough benefits for us to learn it.

Lawyers specialize in it, crazy level.

It's a phrase that my old boss used when I was with my large public firm that stuck with me. It can describe certain things in this world pretty well. And you'd be throwing the "book" back at Congress :)

 Us CPAs/EAs do as well (some more than others), I personally have a Master's degree in the field with a focus in tax on top of my CPA if that tells you education levels required. I've also written/helped write several various legal documents for the IRS/courts. It's not even possible to become a CPA without having at least an equivalent of a bachelor's in accounting (some minor exceptions). Many people who have taken both that I've spoken with also say that the CPA exams are harder than the BAR exams if that gives you perspective. Plus the pass rates are lower for the CPA exams in a large majority of states compared to the BAR. Lawyers do get a little more education time-wise though, so it's all relative.

WOW I didn’t realize that. Granted, this was 20 years ago, but I studied office at a tech school and took common classes with accounting program students. I was under the impression that they could become CPAs.  Wait, no you just jogged my memory because I recall that they could then transfer into 4 year institutions to then pursue a CPA. Yes yes yes.

And this spring I went very far “into the weeds” or “down the rabbit hole” trying to understand what needed to be done.

Yes, you’re right about the “weeds”

It’s tax code weeds! lol

Us investors would throw the book right back the irs if there weren’t enough benefits for us to learn it.

Lawyers specialize in it, crazy level.

I took that information from Pub 946 (2023)
https://www.irs.gov/publications/p946

Anderson Advisors said that the most commonly audited are the small single members that file on schedule c and schedule e, so that is making me cautious.

There is a cpa that I have been meaning to get a consult from, but I was trying to make sure I had all the questions I had listed before wasting time on just the basics. 

The tax code probably changes year to year enough that it creates alot of variety in information. I actually gave feedback on a google search result yesterday, saying it was inaccurate and citing the irs.

This is a very complicated subject and I have learned so much trying to do this, more or less, on my own. Learned that I am a real estate professional, etc. However, the more I learn the more I feel like I can't even finish my taxes on my own and question everything I am doing with depreciation and the way I have categorized costs. The extremely proper English is due to describing math equations and needing to be precise. Orginally I didn't think I would need a filing extention.
Also, does the following apply to me? It looks like I am required to file an amendment after filing first. 

Changing Your Accounting Method

Generally, you must get IRS approval to change your method of accounting. You must generally file Form 3115, Application for Change in Accounting Method, to request a change in your method of accounting for depreciation.

The following are examples of a change in method of accounting for depreciation.

• A change from an impermissible method of determining depreciation for depreciable property if the impermissible method was used in two or more consecutively filed tax returns.
• A change in the treatment of an asset from nondepreciable to depreciable or vice versa.
• A change in the depreciation method, period of recovery, or convention of a depreciable asset.
• A change from not claiming to claiming the special depreciation allowance if you did not make the election to not claim any special allowance.
• A change from claiming a 50% special depreciation allowance to claiming a 100% special depreciation allowance for qualified property acquired and placed in service by you after September 27, 2017 (if you did not make the election under section 168(k)(10) to claim a 50% special depreciation allowance).

Changes in depreciation that are not a change in method of accounting (and may only be made on an amended return) include the following.

• An adjustment in the useful life of a depreciable asset for which depreciation is determined under section 167.
• A change in use of an asset in the hands of the same taxpayer.
• Making a late depreciation election or revoking a timely valid depreciation election (including the election not to deduct the special depreciation allowance). If you elected not to claim any special depreciation allowance, a change from not claiming to claiming the special depreciation allowance is a revocation of the election and is not an accounting method change. Generally, you must get IRS approval to make a late depreciation election or revoke a depreciation election. You must submit a request for a letter ruling to make a late election or revoke an election.
• Any change in the placed in service date of a depreciable asset.

See sections 1.446-1(e)(2)(ii)(d) and 1.446-1(e)(2)(iii) of the regulations for more information and examples.

Yes, that's right. I'm paying for the support feature, but yes. Also, I'm trying to vett if the platform has enough features for real estate tax law. This is the first time I heard the refinance cost deductions are not spread out via increasing via increasing the basis aka the loan amount/purchase price.

YEs, I did an application and a background check beforehand. 

This property is in the north end of Wisconsin. I used to live in this duplex and I moved out to convert it to 100% rental and refinanced. Other topics I have researched about changing the basis include "you don't transact closing costs as an expense in the tax year, it changes the entire basis"....and I have been trying to use a tax platform that I have been using for about 10 years. 

What do you think about what the platform professionals told me:

"

I understand you have a duplex and that previously you lived in half and rented out the other half (I am assuming a 50/50 area split). You have now converted the portion you used to live in to also be a rental property. Let's call the half you have rented out in the past Property A and the portion converted to a rental property in 2023 Property B. Although this is technically one single property, for tax reporting purposes, we will treat them as though they are two totally separate assets because they have experienced different use in their history. See "Renting Part of Property" in IRS Publication 527:

https://www.irs.gov/publications/p527#en_US_2023_publink1000... this situation, you have not disposed of Property A. Property A is still used 100% for rental purposes and its basis for depreciation is half of the total basis of the combined property at the time it was placed in service as a rental property. In other words, you have indicated the total basis of the combined property was $75,000, so that means the basis of Property A is still $37,500, it was still placed in service in 2019, and it will continue to be depreciated over the remainder of its depreciable life.

However, you have placed a new property in service in 2023, Property B. Property B will have its own separate depreciable asset record, as it was placed in service in 2023. The basis of depreciation for Property B will be the lesser of the Fair Market Value of the property on the date it was placed in service OR the cost of the property (plus any additions and improvements -- not repairs, but substantial improvements, such as additions or renovations). See IRS Publication 527, "Figuring the Basis" under "Basis of Property Changed to Rental Use" for more information:

https://www.irs.gov/publications/p527#en_US_2023_publink1000... the loan on a property does not change its basis (the FMV or the amount originally paid for the property), although as previously stated, you may have deductible expenses related to obtaining the refinanced loan.

Regards,
Carter, EA
Pro Support

"

been working to wrap my head around depreciation and I have had a puzzle I am still sorting just because I refinanced last year. I am going to create a different post about what the tax experts on my tax platform said and ask for feedback. 

Accelerated and cost-segregated depreciation are tax deductions for other tax liabilities. If you are a REP, then it will deduct from active earnings. If you are not a REP, then it will deduct only from passive earnings. Passive earnings on that property in the future. The tax expert knows more about whether or not the future is affected by changing the use between 2023 and 2024.
If you are worried about paying taxes on rental income, you might consider that you can rent your home out tax-free for (I believe this is correct) 14 days of the calendar year. 

Quote from @Nathan Gesner:

Quote from @Laura Kreinbring:

...this is not my first rodeo.

I think you are setting yourself up for a rude awakening.

Anyone who rents for more than 30 days is legally a long-term renter. Calling it a mid-term doesn't change the law or how you should behave as the landlord. If you put anyone in a long-term lease, they should be adequately screened, all funds paid, the lease signed, and every other requirement met 100% before you hand them keys.

People who pay cash and want to move in immediately are often the worst renters, usually desperate because they were just kicked out of their last place. Your willingness to take them in will bite you hard one of these days.

 Yes, all that is true. It's setup so that they are given a limited-term lease, but if they breached that and stayed beyond the lease also states that they would continue to pay the same rate. It definitely is the same laws that apply to long-term leases. 
I have seen other landlords put verbiage into leases where tenants pay double if they stay beyond the agreed move out date, and if I wanted to be tough I could do that. 

I moved from the area and have never done this remotely before, and use Keycheck which uses the full-fledged tenant documents for Wisconsin through Rocketlawyer. If I'm going to have an issue it would be now. I haven't heard of Legal Blank. I also have a subscription to Legal Shield. It's a limited-term lease advertised on Furnished Finders. My mistake was doing all the steps at the same time and a bit too quickly, but everything is signed now. They need transition housing I guess, since their permanent home is available in 2 months. There is a woman from California looking to do this upcoming for a year before purchasing locally to live near her children, that sort of thing, and in her case taking it slowly.

The lease is signed and they paid. Per the lease they only owe me about 6 more weeks until they're out.