All Forum Posts by: Nicholas Aiola

@Steve Schaeffer If you did not pay for it, there is no cost basis to capitalize or expense to deduct.

@Amy Konopka

1. I can't say for sure without seeing the return, but it might be because your income is over $150k and the rental activity is passive.
2. Tax prep is a retroactive service. Tax strategy is where the tax optimization should occur. If both are not under the same roof, there should be collaboration between both professionals at a minimum.
3. I'd have to see the return to understand the calculations.

If the legal fees are related to the rental business, they should be on Sch. E.
$3,900 is over the de minimis threshold; this could be a capital improvement.
Not all capex qualifies for bonus depreciation.

Reminder that shifting activity between schedules (for example, Sch. E and C) and between capex/opex is not a choice; the requirements are what they are.

 @Adam Sciupac Unless you are providing "substantial services" (think services a hotel would provide), the average length of stay must be 7 days or less for the STR loophole to work. Auto renew would count as one stay, even if it's two contracts, if there is no break in between.

 @Sateesh Kumar You'll pay tax to NJ regardless if the property is located in NJ. You'll get a credit on your resident state tax return for taxes paid to another state.

 @Alastaire Vicente If there is only one tax return, you'll need to use only one preparer. It does not matter which state the preparer is located in.

 @Jason Thomas The 1099 vs. W-2 determination isn't a choice to make, rather an outcome based on the facts and circumstances. If you are a 1099 contractor, property management hours will count towards your 750 for REPS since you'll be materially participating in that business. You'll still need to materially participate in your LTR business, too, to count those hours towards the 750 and classify the rental losses as nonpassive.

 @Jennifer H. The basic calculation to use is net sales price (sales proceeds less selling costs) minus cost basis (purchase price + capital improvements). If you're single and have lived there 2 out of the last 5 years, you can exclude the first $250k ($500k if you're married).

Assuming you've held it for over a year, you'd pay long-term capital gains rates.

@Terezija Miskic It is essentially never advised to use an S Corp to own rentals. An LLC is most common.

@Aytaj Vily An LLC is a good idea for asset protection, but does not offer any tax benefits or drawbacks. LLCs are tax neutral. The CTA should not prohibit you from forming entities to protect your assets (confirm with your attorney).

Contrary to Ahad's response, an LLC does not allow you to deduct any losses that you otherwise wouldn't be able to. You can deduct expenses regardless of whether you have an LLC. The $150k threshold I believe Ahad is referring to relates to the passive loss income limit, but that does not apply to you. That applies to rentals, not realtor businesses. 

@Michael Pirrello Inheriting the property is the most straightforward and effective way to avoid tax because of the basis step up, but other tax deferral strategies include 1031 exchanges and opportunity zones, for example. An alternative is to keep the house and tap into the equity with a refi or HELOC - loan proceeds are tax-free. Do not gift the property - that will provide no benefit and the recipient inherits the donor's basis.