All Forum Posts by: Michael Plaks

It's going to hurt some but benefit others. Itemized deductions are reduced, but standard deduction is doubled.

They simultaneously doubled the standard deduction. As a result, for many people, the increased standard deduction will end up being higher than what their itemized deductions used to be under the current law. In other words, some will lose, but others will win. 

No problem @Mindy Jensen.  As you can see - it works for me now. Thanks.

@Julie Halloran

Julie, your question has 3 parts.

1. Can you deduct some expenses? The answer is maybe, if your major renovations are finished this year and the property (at least one unit) is rentable before 12/31 and placed on the market. Even if things like painting are not finished, and the tenant is not in place.

2. Is it helpful? Depending on your overall financial situation, claiming deductions against zero rent may or may not reduce your taxes.

3. Should you? Even if you can reduce your taxes this year, it may not be the best option. Ideally, need to look into the next year and see if it's more beneficial next year. Also, expenses against zero income is an audit flag.

If you do decide to claim some expenses in 2017, then a careful planning of the rehab is due. Things like timing, itemizing and separating jobs can make a difference.

Thank you @Account Closed   I googled "patience" - an interesting concept. :)

Hi Craig, I will be happy to help. Working exclusively with REI clients, since 1996.

Pardon for a stupid question. I somehow lost an option to tag other people. I would type  @Michael  at which point a list of Michaels pops up, but when I click on a name it does not get tagged as it used to. What gives? Thanks!

@Jeff Pollack

Let's clarify the intentions first. Your portion of capital gain is already $800k, of which only $500k is exempt, so $300k is taxable. If your mother-in-law's interest is somehow converted to a secured lien, than you'd be 100% owners. Such move will *add* her $165k to your $300k taxable gain. That is counter-productive.

Which leaves only a 1031 option on the table. One sticky issue here is the investment intent, as @Dave Foster pointed out. But before we go there, keep in mind that a 1031 will require that your mother-in-law remains a part-owner of your *new* house - something that may be neither desired (she is not getting paid) nor practical (complications of securing a new mortgage).

@Dave Toelkes - You're on the right track, but you mixed together three separate (albeit related) issues. 

#1. Passive income/loss which primarily affects deducting ongoing operating losses. Rental properties are normally passive, so if you have losses from rentals, they would not be deductible against non-passive income, such as W2 wages or 1099 commissions.

#2. Active participation. If you have active participation (which you do) - the rule #1 is modified to allow deducting up to $25,000 of passive losses against non-passive income, subject to additional restrictions.

#3. Character of losses upon a sale of rental property. I agree that selling a rental at a loss would be unusual. But if it somehow happens, the problem is: if the rental property is a capital asset, then the loss should be capital loss, and capital losses are limited to $3,000 per year - not good! Fortunately, this is not the case, and you're allowed to deduct the entire loss. 

This apparent contradiction is due to a technicality that you really do not need to understand, because your tax software or, better yet, your tax accountant will do it for you. But in case you want to know, rental real property held long-term (>1 yr) is not treated as a capital asset. Instead, it is considered Section 1231 property that is subject to strange (but beneficial to you!) rules: gains are treated as long-term capital gains, while losses are treated as fully deductible ordinary losses. The best of both worlds.

@Nick Liu - this explanation should be helpful to you, too.

The way Nancy Neville uses QuickBooks is not against the law :)
However, for the purpose of tracking expenses, it's far easier to use Quicken.