All Forum Posts by: Marc Howard

@Maria Muniz 

You can transfer your 401k to a self-directed IRA without penalties. Once it's in the self-directed IRA, you can use the funds for various investments, including real estate.

However, borrowing directly from the account or pulling money out might not be penalty-free. solo401k.com is my service--but def do your own homework.

@Andrew Bellini  since you're a W2 employee without any other passive real estate income, depreciation losses from RE syndications can't be used to offset your ordinary income. They can only be used against passive income from other sources.

However, you can carry forward these paper losses to future years. So, if you get passive income from the syndication itself or other real estate investments in the future, you can use the losses to offset that income.

In a nutshell, while it's not necessary to have a rental property to benefit from depreciation, having one or another source of passive income would help you maximize those tax benefits. 

 Thanks @Michael Plaks Iooks like I misread on that one. Appreciate the follow-up. Keep up the great advice!

@Corinna Woodcock it's tough to say if it's fair without knowing all the details, but it's definitely on the higher end.

Comparing it to the percentage of your gross income might not be the best approach, though. CPA fees can vary based on factors like location, complexity of your situation, and the CPA's experience.

If you're unsure, it doesn't hurt to shop around and get quotes from other CPAs. It'll give you a better idea of what's reasonable for your specific case. And who knows, you might find someone who's a better fit for your needs. Good luck!

@Christine Cho congrats on starting your rental portfolio! It's great that you've been handling your taxes so far, but as your investments grow, a tax professional can be a game changer.

Given your plans for LLCs, cost segregation, and more complex strategies, it's smart to consult with a tax pro. Now, as for choosing between a REI-friendly accountant and a more affordable one, it's a tough call. An REI-savvy accountant might be worth the extra cost in the long run, especially if they help you maximize your tax benefits and adapt to your growing portfolio.

So, consider the value they bring and how much you're willing to invest in their expertise. You could also keep searching for the right fit. Just remember, the sooner you find a professional, the better off you'll be in the long run.

Good luck and happy investing!

@Pal Sa kudos to you for wanting to tackle your taxes on your own! So, when it comes to determining the cost of land for depreciation, you should use the land value at the time you purchased the property. That's because depreciation is based on your original investment, not the current value.

You're right that land values change over time, but you'll need to stick with the purchase-year value to keep things consistent when calculating depreciation.

Feel free to ask more questions as you go along. We're here to help, and good luck with your taxes!

@Lily Scanlan tricky situation you've got theree. Technically, you can't classify your property as a rental or short-term rental for tax purposes if you're not actually renting it out. Bummer, I know.

But once you're off that wait list and start renting your condo, you can definitely take advantage of the tax benefits associated with rental properties. So hang in there, and good luck with your move and new job!

@Shay Kent When you live in your primary home for at least 2 of the last 5 years before selling, you can exclude up to $250,000 (or $500,000 if you're married) in capital gains.

Now, renting it out does complicate things a bit. Your CPA might be considering depreciation recapture, which is taxed separately from capital gains. This might be why they mentioned business tax and the rental period.

Def get a second opinion from another CPA or tax professional. They'll help clear things up and make sure you're doin' everything right. 

 @Hillary Young Even if your son's W2 income of $12,950 falls below the threshold for filing a federal return, he might still need to file a state return in Indiana. State tax rules can be different from federal rules, and Indiana has its own filing requirements.

For Indiana, if your son's income is more than the state's standard deduction, he'll likely need to file a state return. You can check Indiana's filing requirements on their Department of Revenue website to be sure.

@Victor Alfonso congrats on those SFR properties in Metro Atlanta! Tax prep for partnership properties can be a bit tricky.

For the first scenario, you could report the income, expenses, and depreciation on your tax return, then issue a Schedule K-1 to your partner for their 50% share. That way, you're both reporting your fair share.

For the second scenario with the revocable land trust, treating it as a disregarded entity seems like a reasonable approach. You can report the property's income and expenses directly on your tax return, then issue a Schedule K-1 to your partner for their 50% share, just like in the first scenario.

Even though I'm offering you some advice here, your CPA's suggestion to consult a real estate tax attorney is a good one. Tax laws can be complicated, and you don't wanna mess around with them. 

I hope this helps, and best of luck with your tax prep!