All Forum Posts by: Taylor Brugna

@Vilson Nikollaj Whether or not box 3 is taxable is ultimately decided by if the interest would have been deductible if the debt was actually paid. 

For example, if the loan was a personal loan (interest is not deductible if paid), box 3  would be taxable. If it is a business loan (interest is deductible if paid), it would not be taxable.

Hope this helps!

@Robert Rodriguez Get your business name on the t-shirts or something like that.. I'd call it advertising expense and it would be fully deductible. 

Thanks for the mention @Allan Rosso! @Bob Razler Yes, when you live in one of the units, that unit is essentially treated like a primary residence would be for tax purposes, and the remaining is treated like a rental. You would only depreciate the rental portion and you would only capitalize the rental portion of CapEx (roof)

You get to utilize the section 121 exclusion on the portion you are living in (Up to 250K of capital gains). You get to deduct a portion of repairs and expenses on a "whole property level" that you otherwise wouldn't get to take if you had a stand alone residence. Any repairs directly made to rental units can be fully expensed. The biggest reason why people love house hacking is that the tenants essentially pay your mortgage if done right, and you live for free!! Although I think the pros outweigh the possible cons, one con might be that depreciation may not beneficial depending on your tax bracket. Depreciation needs to recaptured at a rate of 25% once the property is sold. However, a 1031 exchange on the rental portion can solve that problem :)

Hope this helps!! 

Highly recommend that you speak to Dave Foster

@Will Rodgers When you own a rental property, you will report your income and expenses on schedule e. Considering depreciation and various other deductions associated with the property, it is not uncommon for investors to show a loss on these properties. If you're income is under 150k, the IRS allows you to offset active income (w-2 wages from your day job) with the losses. It can be a great way to reduce your tax liability. 

Nick Eckemoff I'd recommend you expand your search to find a CPA that specializes in real estate. This is significantly more important than somebody who is in your area, especially with technology these days. State taxation is something that any competent CPA can handle, but developing tax strategies for investors is not something all CPAs do on a regular basis. Hope this helps

I second what @John Thedford said-have been very happy with @Jeff Copeland and have worked with him on quite a few deals. He also is an awesome property manager. 

@Allan Rosso I think you're mixing up capitalizing and depreciating vs. expensing (deducting in the current year). This is a general rule (de minimus safe harbor), but if a major repair is over 2,500 it means that it will need to be deducted over a longer period of time than one year. For example, a roof costs you 15k to replace. The IRS won't let you deduct the entire 15k in the first year, but they will let you deduct a portion of the roof for 27.5 years. 

Hope that makes sense. The roof is "claimable", just not all in one year. 

Allan Rosso If you are referring to expenses related to your rental property as business expenses you definitely do not need an LLC to claim deductions. Tax deductions must be ordinary and necessary in the course of business. Repairing drywall would absolutely be a legitimate deduction, and it would be taken on your schedule E as a repair if under $2500. If you have business expenses related to a bunch of properties, you still don't need an LLC. You can just allocate the expenses to each property accordingly. A single member LLC is disregarded entity for income tax purposes, meaning that if you had one or not you'd still file and claim deductions in the same place.

@Michael Beeman Congrats on your success! Love hearing stories like these..how were you able to secure financing after going through bankruptcy?