All Forum Posts by: Sammy Habbaz

For those that don't know, TN recently changed the way the franchise tax is calculated. 

Before it was calculated based off of the greater of net worth (most RE entities have a negative net worth) and property base, with a minimum of $100 due. Now they are saying property base calculation is unconstitutional. Therefore, those who were charged based off this calculation can get a refund for 2020-2023.

In order to receive the refund, you need to file an amended return. You have until November 30th. Some people have already received notices, but not everyone eligible will be notified. So it's important to reach out to your accountant to see if you can get a refund. 

Quote from @Troy Welch:

I don't really know what I need.  I think I am looking for someone to do taxes and give tax advice but I am 52 with a great job and would like some advice for investing / retirement planning.  Right now with it being tax season, giving tax advice is the big thing and helping me file the taxes. I worked with a CPA out of state a couple of times and it just felt like I was filling in the blanks - no different than using Turbo Tax - no advice given.  It gave me a bad taste.  I feel like there are a lot of tweaks that I need to make to reduce my tax burden.

I starting RE investing back in 2018.  I have 3 rentals now. I would like to add to that I've just been busy with other stuff.

I keep track of income / expenses for my 3 income producing properties in a spreadsheet.

I also just bought a new home last year and still trying to sell the old home. That old home is about to turn into a rental if I don't get someone on the hook.

Hi Troy -

Sorry to hear you didn't have a positive experience. Oftentimes there's a disconnect between what the client wants and CPAs services. Usually because:

1. Client doesn't ask. Sounds silly, but base level service is assume tax filing and compliance. Not planning. 

2. There really isn't much planning available. Not the CPAs fault here, but should explain why that may be the case. 

3. The CPA is not familiar with your particular area of tax (in this case real estate). 

Some firms (like mine) do have family office services that would incorporate everything you're asking for, but it may be overkill depending on your goals, net worth, and current situation. If your retirement and investing goals are basic, a regular CPA should be sufficient. 

Quote from @Robbie McCarthy:

I'm a developer, landlord, flipper looking for a long-term CPA to work to grow the business by setting the optimal tax strategies in place. I have rentals in both states and am currently marketing a flip purchased in 2023 and need to determine the best way to handle the 2023 tax return plus the resulting finds from the sale of the flip.  Booker in place has full books for 2023/24. But we are missing expertise the maximise our current and future tax position. Thanks. Robbie

Try reading some of the posts here from other accountants. See if someone sticks out as a potential partner. 

In terms of your tax situation, if economically feasible try renting for a year first. Could eliminate the self employment tax on the flip. 

Also try to time the sale and the purchase of a new property within the same year. This will allow you to use bonus depreciation to offset some of the gain. 

There's a lot that goes into this, mainly making sure the numbers work first, then worry about the taxes. Then talk to a CPA, if this works with your overall tax situation. 

Quote from @David Orr:

2. This is actually an interesting topic that I've actually went down quite a rabbit hole of researching recently, and it gets complicated. It could be interesting to dive into a discussion about this in another thread.

3. But I have seen arguments that say it could be allowable and I think it could also be interesting to dive into that in another thread. 

Hi @David Orr - fair on all counts. This area of RE Tax is oddly confusing. I remember vividly trying to make sense of all this. I will say in general I don't like to take aggressive stances, but I don't think this is one of them. Happy to discuss this with you and @Michael Plaks in another post or offline. Always great to learn from other professionals. 

So I mostly agree with David with a few small caveats. 

1. Start up costs can be deductible when the trade or business begins and usually that would be tied to when the property is ready and available to rent. Doesn't need to be occupied, just advertised. 

2. Start up costs wouldn't include repairs and maintenance. They would be capitalized and added to the basis of the property. To be later depreciated. This is a bit technical, but normally repairs under 2,500 can be expensed under a special election. Those repairs need to be placed in service. Since they wouldn't be, you can't use the election. The only other option would be to then to add it to the basis and capitalize. 

3. Assuming you're not a large real estate investor, there's a case to be made that you can deduct interest expense and real estate taxes. 

4. Agree with David about timing of the cost seg. The rush is more to get the property placed into service than it is to do a cost seg in a specific year. You can also do it strategically if you're planning on having a high income year. 

feel free to DM me if you want to continue this conversation further. 

Quote from @Chelsie Hall:

Thanks for that insight, Troy. I really appreciate the push in the right direction.

I met with a local CPA that supposedly specialized in real estate but he advised against it without even asking what my strategy was—which is buy and hold until I die! He also pushed me to sell my rental home (to an LLC or family member) in order to take advantage of something only available in the early years. I know I'm no expert, but I don't like being told by an expert what to do without also being taught why. I guess I should keep looking for a new CPA.

Out of curiosity, what did they say they wanted to take advantage of? Something sounds weird here. As an accountant communication and education for our clients is essential. Especially, weaving in our clients desired goals. Seems like you should definitely keep looking and get a second opinion on what this local CPA is advising you to do. 

Quote from @Adam Mathews:

Quote from @Sammy Habbaz:

Quote from @Adam Mathews:

We have 27 properties all under their own LLC's (each LLC has between 2 and 4 members) plus a couple other misc. entities (totaling ~33) and recently our accountant of 40 years retired. We have been searching for someone to take over and have been getting quotes as high as $1,200/WEEK for annual tax filings including some book keeping and payroll for 2 entities. (No strategy calls, or advice meetings/etc)

Are these the normal rates for the NYC area?

I appreciate any feedback or comments, thank you.

I'm located in NYC and just the tax filings I would charge 3,000 which is about 1900 a week. Then bookkeeping would be a separate charge of 250 an hour but probably won't take long if it's for only a few entities. 

Advisory services would be separate and again would be 250 an hour. Hope that puts things into perspective.

Out of curiosity what type of strategy calls and advice meetings are you looking for?

I also think you should consider that you were with your CPA for 40 years. Chances are he was under charging you (even if he did raise his rates once in awhile). 1,200 a week is even cheap for today's rates. I would be careful paying too low of a price on a CPA. 

 Thank you for the reply. He definitely gave us a good rate, if I calculated it per filing it would be around 700 each entity including book keeping/etc.

We have had someone give us an offer of $1,000/week and from what you're saying in todays' world that's a really good rate. But at the same time may not be the best idea to go with the cheapest rate.

Sorry for any confusion, I was saying that there would be no need for advice/strategy calls/etc.

 No worries. Glad I was able to give you some perspective. Yea cheap is something you definitely want to look out for. Personal opinion, I wouldn't go with someone that cheap in NYC unless you knew a few people personally who use them.

Firms priced a little higher, doesn't necessarily mean better, but they probably have a team and/or more reputable. 

Good luck with your search! Feel free to DM me if you have any more questions. 

Quote from @Adam Mathews:

We have 27 properties all under their own LLC's (each LLC has between 2 and 4 members) plus a couple other misc. entities (totaling ~33) and recently our accountant of 40 years retired. We have been searching for someone to take over and have been getting quotes as high as $1,200/WEEK for annual tax filings including some book keeping and payroll for 2 entities. (No strategy calls, or advice meetings/etc)

Are these the normal rates for the NYC area?

I appreciate any feedback or comments, thank you.

I'm located in NYC and just the tax filings I would charge 3,000 which is about 1900 a week. Then bookkeeping would be a separate charge of 250 an hour but probably won't take long if it's for only a few entities. 

Advisory services would be separate and again would be 250 an hour. Hope that puts things into perspective.

Out of curiosity what type of strategy calls and advice meetings are you looking for?

I also think you should consider that you were with your CPA for 40 years. Chances are he was under charging you (even if he did raise his rates once in awhile). 1,200 a week is even cheap for today's rates. I would be careful paying too low of a price on a CPA. 

Quote from @Michael Truman:

Hello BP'ers !

I'm currently under contract on my first investment property and will close on January 12th 2024. I live in Virginia in the Hampton roads area but have went under contract on a 6/2 2700 sq ft house in Elizabeth City, NC. Super excited about the potential but I am in need of a investor friendly Tax advisor to allow me to do Cost Seg and potential bonus depreciation. Any help provided from this incredible community would be much appreciated as i get my journey started. 

First congrats and good luck on your journey! 

What have you been doing for a CPA before this?

You don't need a CPA do to a cost seg, although we do have many contacts. 

Since you closed in January 2024 you can actually wait a year, since I'm assuming 2023 was a pretty standard year for you.

1) you shouldn't worry that it looks wrong. Work with a professional, keep good records and you're good. 

2) don't think it would have a specific name. It's a cross between an investment property and personal use property. 

3) Assuming you don't qualify as a real estate professional, assuming your AGI is above 150K, and assuming that this isn't a short term rental, the losses are considered passive and limited to this specific activity. If you block off these rooms and don't use for personal reasons, there's leeway to say that the rooms are considered it's own activity and it won't be limited. 

 The most advantageous from a tax perspective would probably be to have that second home to be a short term rental. But I wouldn't make a decision solely for tax purposes.