All Forum Posts by: Mikael Winkler

Thank you all for the responses. @Basit Siddiqi hit the nail on the head with how I was thinking about capital gains. I was thinking it was a straightforward "if you make x, you're taxed at y%" (wish it was!). I have done further digging and now more fully understand how it actually works. Unless I made zero dollars and realized a capital gain of less than $40,000, the gain stacks on top of my W2. Thus, the vast majority of it will be taxed at 15%. Nothing is ever simple with taxes! 

Thank you both for the additional responses. After some more in-depth research, I realize that this is a more complex situation, as you both alluded to. While I'm awaiting further clarification from my CPA, I do see that these are separate income forms, and the capital gains tax brackets are not a black and white "if you make below x, you pay y%". That's essentially how I was viewing it. I also now see that the capital gain is layered on top of one's ordinary taxable income, which pretty much explodes the theory I had haha.

More in-depth planning with my accountant is warranted. Thanks again, to both of you!

Hello Brian!

Thank you for responding. I have also reached out to my accountant, just awaiting him to get back. Just figured I'd get some insight on here, as well. Is it essentially that capital gains isn't taxation related to ordinary income taxation; you can't base what you may or may not get taxed in capital gains off of personal income?

Hello BP!

I've been kicking around a capital gains question for awhile, hoping to get some insight. To preface, I'm planning to cash out of a duplex I own in my personal name, either through a sale to my partner or on the open market. I haven't 100% determined which of those routes yet. My question is in regard to the capital gain I would realize in either scenario.

Essentially, I am looking to avoid paying capital gains tax, however, I'm not in a position to do a 1031. Unfortunately, I had a flip go sideways for me, and I'm carrying a lot of personal debt right now, incurred from getting that project to the finish line. So, avoiding capital gains tax on the disposition of this duplex would also go a long way in helping relieve some of that debt, as well.

In trying to figure a way to avoid the tax, outside of a 1031, I've been thinking about a particular strategy. It looks like the current long term capital gain tax bracket allows for a 0% rate if a single filer makes less than $40,000 yearly. I don't make much at my W2 job; I really just have it for the W2. I usually do gross less than that. Now, in 2020, when combining my W2 and rental income from that property, I've gone over that $40,000 threshold. So, my thinking is, regardless of how I exit the property, to close in 2021. Without the rental income, and as long as I don't earn more than $40,000 personally next year, I wouldn't have to pay tax on that gain. Is that logic correct?

I also do plan to buy at least one, perhaps two, properties in 2021. Could those be planned so that any rental income is offset by the losses I could claim, effectively keeping my income below that $40,000? Moving forward, I plan to hold those in my LLC actually anyway, so I'd have any rental payments made to that LLC. Perhaps as long as I don't draw any profit from that into my personal name until 2022, that would also be a viable way to shield my personal income and keep it below the 0% capital gains tax threshold.

Does the way I'm thinking through this strategy sound feasible? Any insight is appreciated!

Definitely agree regarding Columbus. While entry price is a bit higher, there are still deals to be found in many of the revitalizing areas. Especially if you're working with a good investor agent or wholesaler. Many of these neighborhoods may be in the B-/C range but are quickly being redeveloped, causing solid appreciation. 

@Mayank Saxena yes, Columbus is really growing right now. We are expected to grow by over a million residents in the next 30 years. Investment in most neighborhoods surrounding the downtown area has exploded in the last handful of years, which has begun pushing further and further out. The diversification and growth of industry, along with expanding entertainment options, are making it a great investment, as well as, enjoyability (I may have made up that word haha) city to be. While many here locally are starting to wonder if it's getting too expensive investment-wise, great deals can still be found. Especially if you're used to CA prices. 

@Allen Tracy ahhh ok. Yeah, hopefully you can get that set up to keep things streamlined!

@Allen Tracy

Any particular reason your rent payments for section 8 go to you instead of your PM?

Hey @Ashley Ramirez! If you're choosing between those two, perhaps reach out to some local brokerages for one that is open to you wholesaling. I'm sure you're already aware, but a licensed salesperson, you'll have to work under a brokerage. Some are ok with wholesaling, but you'll probably have to give them a percentage. However, you're able to wholesale without some of the restrictions non-licensed wholesalers are. 

A wholesaler can't market the property, only their interest in the contract. So, that technically means they can't supply any pictures, property specs, or hold showings etc. But, if one is licensed, they can market the property, so all of those things would be fair game. 

I'll be curious to see some other responses on this because the one grey area I've always wondered about with licensed wholesalers is how wholesaling interplays with their fiduciary duty as an agent. Basically, it's a licensed person's fiduciary duty to do what's best for the client. But, is that limited to doing what the client says or getting them the most for their property? As an example, say an agent is working with a seller who is willing to put their house in contract for $50k, but the agent knows someone would pay $65k for it. To a non-licensed wholesaler, that's their spread. But, as an agent, is that breaking fiduciary duty to the client by not getting the seller the highest amount warranted?

Some definite pros and cons to both. Hopefully we get a few more responses here.

Following, as I'm very interested in this topic, as well.