All Forum Posts by: Rudy Duran

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ok, so full time RE pro only works for federal purposes.  

Beginning in 1994, and for federal purposes only, rental real estate activities performed by qualified real estate professionals are not automatically treated as passive activities. California does not conform to this provision. Therefore, for California purposes allrental activities are considered passive activities.

Federal taxes, you're allowed to deduct $25,000 of passive real estate losses against your active income eg w2 income that you actively participate.  They phase out this deduction starting at 100k agi.  However, if you are full time real estate professional you can bypass this limit.

Does this work the same for Californian income taxes?

I'm using turbo tax.  my spouse federal w2 income approx 155k.  but since i'm full time RE pro, i bypass the limit and took 56k in losses according to schdule E.  On my california return, my modified agi is 155k again (pulled from a federal worksheet).  California says since it's over 150k, i get 0 losses against my active income.

Did i mess up, or does fed just allow 55k loss while california allows 0?

It's still a big deal in the lower brackets.

any Californians (married) with agis between 103 and 150k are still paying (25 fed 9.3 state) 34.3% in this marginal bracket. $13,720 extra in your pocket (for buying vs renting) in current system.

quoting myself above: SFH are usually in the marginal 44% effective tax brackets (28 federal, 9 state, 7.5 FICA).  

marginal effective tax rate is different than federal tax bracket. 40

I made a mistake though, deductions don't affect fica. so take off the 7.5 there.  marginal effective tax rate is about 37% for married californians over 190k+ agi.  (which is majority of people buying 1mil+ homes).  

existing, it's approx 14.9k/year + 150k in the first 10 years ago.

new, it's 22.57k first 10 years.

 20k a year! what is the property worth?  California effective prop tax is very low thanks to prop 13.  you have many people in palo alto with 3m homes makes 3k/year since property taxes are grandfathered in.  It's a typical screw the new guy policy.

holy crap, capping mortgage interest at 500 is huge. Rising home values effects everyone including multiplexes.. Out here in california, per 1million house roughly $40k annual in mortgage interest the first 10 years of buying a house. prop tax about 13k per year (will be capped at 10k in proposed plan). people who can buy this SFH are usually in the marginal 44% effective taxbrackets (28 federal, 9 state, 7.5 FICA). standard deduction was roughly 12.7k for married. so itemized vs standard was the difference between 53k and 12.7. 40.3k difference = 17k extra cash in your pocket as itemized vs standard deduction. Just tax incentive to buy vs rent a home is an extra 170k in the first 10 years alone.

under the new plan,

You’ll only get about 21.5k/year (homes capped at 500) of mortgage interest + 10k of prop tax. 31.5k itemized deduction vs new standard at 25.4k = 6.1k difference. That gives a 27k tax incentive to rent vs buy for the first 10 years.

Of course we have to consider appreciation, gaining principal equity vs renting. But just the tax incentive will decrease the incentives for buying.

most media outlets are very skeptical they'll be able to pass such large changes.  

High end is subjective.  In the Bay Area, entry level stainless is not high end.  

IMo, you can't just compete any more.  flyer design can be done so cheaply by anyone int via an online presence.  it's like opening a local electronics store competing with amazon.  There are people offering designs for $5 on fiver, dont know if they any good though.

I would at least try to throw a photography package in.  the camera gear won't cost you $2k, but you'll have to spend a lot of time learning how to use it.   I would then also offer to flyer the neighborhood as part of the package (pay someone else to do it)

also agents aren't incentivized to increase the sales price.  It barely makes a difference in their commission compared to actual work.  They just want a sale to go through, 95% of the same commission (after a cut to the broker, taxes, etc), 20% of the work.

If anything I would market to the owner directly as they actually want a large sales price.

i read on another board where the postal station called the number on the flyer chewing them out.  They let em off the first tie with a warning.  Just not worth the risk, Place the flyers on doors fences or even inside a bag with a rock.