All Forum Posts by: Taylor Jones
Taylor Jones has started 5 posts and replied 24 times.
Post: How to pay $0 in taxes on a STR generating over $120K in revenue
- Investor
- Orlando, FL
- Posts 27
- Votes 34
Quote from @Nate Sanow:
Hey Taylor, would this change next year when bonus depreciation is 80%, and ultimately phased down to 0% in the next few years? Certainly can / will affect this strategy if so. I do hope they bring back bonus depreciation and my question isn’t for debate, moreso curiosity.
We'll continue to use the best options available for tax savings while investing in RE. No idea about future policies but I definitely hope opportunities like bonus depreciation stay around to continue to promote more investments in RE.
Post: Buying a STR is not the hard part. Managing the Renovation is.
- Investor
- Orlando, FL
- Posts 27
- Votes 34
Most people think buying their STR is the hard part. They are wrong
Renovating, Furnishing & Preparing to list the property is the hardest part
I'll show you how we manage 15+ STR renovations at the same time across the US all while doing it remotely
Let’s dive in:
Underwriting Stage
When we are underwriting an STR we make notes of all the renovations/amenities we want to add to the property. This allows us to know approximately what we'll spend during the renovation/furnishing stage after we acquire the property.
Budget
We go through our list of renovations & label each item as essential or nice to have. Based on the budget for the property, we’ll take care of all essentials plus as many of the nice to have’s as possible if budget allows.
Timing
Once we’ve passed DD & appraisal stage, we begin interviewing contractors in the city where the property is. We source from realtors, other investors, google, & FB groups. We’ll get bids from as many as possible and figure out timelines for completion.
Payments
We never want to have a contractor steal money so we keep our system simple: we pay every Friday based on the previous 7 days worth of work. Pictures of every single project are required in order to get paid. This protects us and makes sure things are getting done.
Backups
If a project is experiencing issues, we’ll sometimes have our agent run by and give us a video tour of the progress and a general sense for how the remodel is going.
Last Mile
We'll hire a local stager to make sure the furniture is all in the right spot along with decor, throw pillows, etc. After this, it’s time for professional photos and building the listing!
Every day you spend renovating is another day of carrying costs and lost booking revenue. Stay organized, hold contractors accountable, & execute your vision!
Post: How to pay $0 in taxes on a STR generating over $120K in revenue
- Investor
- Orlando, FL
- Posts 27
- Votes 34
Quote from @Don Konipol:
Quote from @Collin Hays:
Quote from @Taylor Jones:
Quote from @Collin Hays:
Quote from @Jon Fletcher:
Quote from @Collin Hays:
You've got your math way, way wrong. Yes, you can deduct $20,000 a year in depreciation. But that's not a tax credit. It's a tax deduction.
So let's say you are in the 30% income tax bracket. Your cabin nets, after all expenses, $100,000 per year. If you depreciate $20,000 per year on the property, your tax savings is $6000 per year, not $20,000. (30 percent of $20,000)
And as John said, depreciation is tax deferral, not a tax write off. Big difference. Every dollar you depreciate lowers your basis. When you sell, the IRS will recapture that amount.
And even assuming for a moment that you indeed had a "tax loss" of $230,000 - on this property or any other - the maximum annual loss you can claim per the IRS is $25,000, and that would be an income deduction, not a tax credit. Once your AGI reaches $100,000, that stars phasing out rather quickly.
And you can't "bonus depreciate" a percentage of your full purchase price of $640K. There's a very limited list of things you can bonus depreciate. Certainly not the dwelling and the land.
My friend, you need a new accountant.
@Collin Hays I think you're partially wrong here. If the property is used as a STR, then the cap is not limited to $25,000. My understanding is that you can use the loss created by accelerated depreciation on your STR to offset your W2 taxes in excess of $25,000. This is because a STR is "active income" not "passive income" or "investment income."
If it's active income, that throws out a whole new can of worms, such as FICA taxes of Medicare and Social Security, which will total out to 15.3% up to certain limits. And I will bet a nickel that you can't "bonus depreciate" the value of the house and land. That's just silly.
You are misleading folks on here. You've got 10 posts total, several of which are nonsense. Need to cut it out.
Thanks Don. I've learned from reading about others and their journey. I'm giving back to the community and all of those that have helped me along the way. Not pushing anyone or selling a course or pushing product. Just giving people knowledge I've gained from others before me
Post: New Short Term Rental Launch
- Investor
- Orlando, FL
- Posts 27
- Votes 34
Post: How to pay $0 in taxes on a STR generating over $120K in revenue
- Investor
- Orlando, FL
- Posts 27
- Votes 34
Quote from @Bill F.:
Quote from @Taylor Jones:
Quote from @Collin Hays:
Quote from @Jon Fletcher:
Quote from @Collin Hays:
You've got your math way, way wrong. Yes, you can deduct $20,000 a year in depreciation. But that's not a tax credit. It's a tax deduction.
So let's say you are in the 30% income tax bracket. Your cabin nets, after all expenses, $100,000 per year. If you depreciate $20,000 per year on the property, your tax savings is $6000 per year, not $20,000. (30 percent of $20,000)
And as John said, depreciation is tax deferral, not a tax write off. Big difference. Every dollar you depreciate lowers your basis. When you sell, the IRS will recapture that amount.
And even assuming for a moment that you indeed had a "tax loss" of $230,000 - on this property or any other - the maximum annual loss you can claim per the IRS is $25,000, and that would be an income deduction, not a tax credit. Once your AGI reaches $100,000, that stars phasing out rather quickly.
And you can't "bonus depreciate" a percentage of your full purchase price of $640K. There's a very limited list of things you can bonus depreciate. Certainly not the dwelling and the land.
My friend, you need a new accountant.
@Collin Hays I think you're partially wrong here. If the property is used as a STR, then the cap is not limited to $25,000. My understanding is that you can use the loss created by accelerated depreciation on your STR to offset your W2 taxes in excess of $25,000. This is because a STR is "active income" not "passive income" or "investment income."
If it's active income, that throws out a whole new can of worms, such as FICA taxes of Medicare and Social Security, which will total out to 15.3% up to certain limits. And I will bet a nickel that you can't "bonus depreciate" the value of the house and land. That's just silly.
Lol, maybe should have lead with that... us mere mortals can't take take RE loses against our income so they pile up until we sell when deprecation recapture comes a knocking.
Also should probably mention mention you need to pay for a cost seg study, which are a few grand.
These two facts make this strategy much less attractive for no RE professional in the single family realm.
Wes charges ~$1k for SFH cost seg studies. Affordable price and great opportunity for some to take advantage of depending on their investment thesis
Post: How to pay $0 in taxes on a STR generating over $120K in revenue
- Investor
- Orlando, FL
- Posts 27
- Votes 34
Quote from @Collin Hays:
Quote from @Taylor Jones:
Quote from @Collin Hays:
Quote from @Jon Fletcher:
Quote from @Collin Hays:
You've got your math way, way wrong. Yes, you can deduct $20,000 a year in depreciation. But that's not a tax credit. It's a tax deduction.
So let's say you are in the 30% income tax bracket. Your cabin nets, after all expenses, $100,000 per year. If you depreciate $20,000 per year on the property, your tax savings is $6000 per year, not $20,000. (30 percent of $20,000)
And as John said, depreciation is tax deferral, not a tax write off. Big difference. Every dollar you depreciate lowers your basis. When you sell, the IRS will recapture that amount.
And even assuming for a moment that you indeed had a "tax loss" of $230,000 - on this property or any other - the maximum annual loss you can claim per the IRS is $25,000, and that would be an income deduction, not a tax credit. Once your AGI reaches $100,000, that stars phasing out rather quickly.
And you can't "bonus depreciate" a percentage of your full purchase price of $640K. There's a very limited list of things you can bonus depreciate. Certainly not the dwelling and the land.
My friend, you need a new accountant.
@Collin Hays I think you're partially wrong here. If the property is used as a STR, then the cap is not limited to $25,000. My understanding is that you can use the loss created by accelerated depreciation on your STR to offset your W2 taxes in excess of $25,000. This is because a STR is "active income" not "passive income" or "investment income."
If it's active income, that throws out a whole new can of worms, such as FICA taxes of Medicare and Social Security, which will total out to 15.3% up to certain limits. And I will bet a nickel that you can't "bonus depreciate" the value of the house and land. That's just silly.
You are misleading folks on here. You've got 10 posts total, several of which are nonsense. Need to cut it out.
Wasn't sure how I was misleading. This is an exact situation from our investment journey that I'm sharing and bringing attention to the concept of depreciation and cost segregation. Hopefully people have an ounce of sense to consult a tax professional prior to taking any action. Next time, I'll mention it so they get a nudge if they weren't smart enough to consult their tax professional first before doing something involving RE and their taxes.
Post: How to pay $0 in taxes on a STR generating over $120K in revenue
- Investor
- Orlando, FL
- Posts 27
- Votes 34
Quote from @John Underwood:
This is true, the rub is that your taking more depreciation on the front end and will have less on the back end.
If you ever sell you have depreciation recapture. If you never sell you won't have to worry about it.
We are continually buying more RE so having less on the back end isn't a concern for us based on our strategy. When/if we sell, we'll utilize opportunities such as a 1031 exchange to be able to defer these taxes longer.
Post: How to pay $0 in taxes on a STR generating over $120K in revenue
- Investor
- Orlando, FL
- Posts 27
- Votes 34
Post: How to pay $0 in taxes on a STR generating over $120K in revenue
- Investor
- Orlando, FL
- Posts 27
- Votes 34
Quote from @Collin Hays:
Quote from @Jon Fletcher:
Quote from @Collin Hays:
You've got your math way, way wrong. Yes, you can deduct $20,000 a year in depreciation. But that's not a tax credit. It's a tax deduction.
So let's say you are in the 30% income tax bracket. Your cabin nets, after all expenses, $100,000 per year. If you depreciate $20,000 per year on the property, your tax savings is $6000 per year, not $20,000. (30 percent of $20,000)
And as John said, depreciation is tax deferral, not a tax write off. Big difference. Every dollar you depreciate lowers your basis. When you sell, the IRS will recapture that amount.
And even assuming for a moment that you indeed had a "tax loss" of $230,000 - on this property or any other - the maximum annual loss you can claim per the IRS is $25,000, and that would be an income deduction, not a tax credit. Once your AGI reaches $100,000, that stars phasing out rather quickly.
And you can't "bonus depreciate" a percentage of your full purchase price of $640K. There's a very limited list of things you can bonus depreciate. Certainly not the dwelling and the land.
My friend, you need a new accountant.
@Collin Hays I think you're partially wrong here. If the property is used as a STR, then the cap is not limited to $25,000. My understanding is that you can use the loss created by accelerated depreciation on your STR to offset your W2 taxes in excess of $25,000. This is because a STR is "active income" not "passive income" or "investment income."
If it's active income, that throws out a whole new can of worms, such as FICA taxes of Medicare and Social Security, which will total out to 15.3% up to certain limits. And I will bet a nickel that you can't "bonus depreciate" the value of the house and land. That's just silly.
Post: How to pay $0 in taxes on a STR generating over $120K in revenue
- Investor
- Orlando, FL
- Posts 27
- Votes 34
Quote from @Andrew Steffens:
Great info! I just started doing the cost segregations last year, did not know about it even with 10 years of investment experience!
Yeah such a great opportunity to utilize as an investor