All Forum Posts by: Account Closed

Quote from @Rachel Mazzanti:

Quote from @David Miller:

Hello, 

Does anyone have any good CPA recommendations in Chicago?

I use 1-800 accountant today, but want to switch over to Quickbooks and then work with a local CPA. 

Any recommendations would be appreciated. 

 Hello David,

Any reasons for a CPA? Definitely look for some remote accountants as this will wider your range of available accountants.

If you need someone to handle your day to day operations in terms of accounting then there are plenty of people on BP!

I second @Account Closed's suggestion on finding people here on the forum and see the value they bring in. I know there is a scarcity of accountants in general. Definitely reach out to them if they are taking on new clients with your portfolio.

 Thank you for saying so! 

Quote from @David Miller:

Hello, 

Does anyone have any good CPA recommendations in Chicago?

I use 1-800 accountant today, but want to switch over to Quickbooks and then work with a local CPA. 

Any recommendations would be appreciated. 

 Hey David! Any reason why you want to work with someone local? Lots of firms have investors all over the united states and can do just as good of a job if not better then someone around the corner because they have a less narrow view of tax usually. Just an idea! As for finding these people id recommend seeing who is providing real value in the forum and reach out to them to see if they are accepting clients. Best of luck! 

Quote from @Alfredo Cardenas:

Hello, Anyone has experience using REPS status via their wife or husband to offset W-2?  

MY 2024 W-2 will be more than $300K and this year (2024) I married a real state agent. I have been reading a lot and educating myself on the REPS scenario for me to use the real state losses in 2024 to offset my 2024 W-2 income. I believe my wife and I pass all the tests under REPS and material participation (adding our time spend of our rental together). I understand that I can not use any prior rental looses losses to offset W-2 in 2024 ( i am using those prior year losses to offset capital gains of 3 homes i sold in this year/2024). BUT, I believe I can do a cost seg and bonus depreciation on the 3 remaining (the ones that I did not sell this year) rentals in 2024 to use those losses to offset my 2024 W-2 via REPS. Is this correct?

Questions:

1- Does the above strategy sound correct or am i am missing something? If this is right, I can save a very significant amount on taxes. 

2- what is the  estimate percentage of people with high W-2s that get audited my claiming REPS via their wife REPS status to offset W-2? Is it almost everyone? 

3- Does anyone have an example of a time log for the material participation test? 

 HeyAlfredo,

Your strategy seems correct; if your wife qualifies for REPS by meeting the 750-hour and 50% personal service time requirements, you can use cost segregation and bonus depreciation on your remaining rental properties to generate losses that offset your 2024 W-2 income. However, be aware that the IRS closely scrutinizes REPS claims, so ensure meticulous record-keeping and documentation of hours to substantiate your status. Please keep in mind that the 500 hours of material participation test is required for the rental activities along with the 750 hour test. That is unrelated to a real property trade or business. 

If you need a REPS tracker I am happy to provide you the one our clients use, just shoot me a DM! 

Quote from @Patrick Shep:

What are some good end of year tax deduction strategies (outside of increasing your 401lk contributions). I've read a lot of people will buy a property as an STR, put it into service then do a cost seg. I'm looking to offset rental income.

I can't take a passive loss against my W2 income. Would love to hear some advice.

If you are interested in STR, that is a great path to go down this year. You can use bonus deprecation to offset a significant chunk of your w2. I would like to emphasize that you should not invest for tax benefits alone, you should be investing in things that you like and understand before anything else. The tax benefit is the cherry on top!

Quote from @Chris Seveney:

@Zachary Jensen

I am now super curious if this persons real first name is marijuana

 i just put "MP" LOL 

Hello MP, 

To answer your question: Yes, in a divorce, the IRS allows for tax-free transfers of IRA assets, including those in a Self-Directed IRA (SDIRA), if the transfer is specifically outlined in the divorce decree. To avoid tax implications in this case, the divorce decree must explicitly state the requirement to disburse the property from the SDIRA and retitle it in the owning spouse's name to facilitate raising the $50,000. If this is done as part of the divorce settlement, the transfer can potentially be treated similarly to other IRA transfers in a divorce, avoiding immediate taxation. However, precise execution according to IRS rules and clear documentation in the divorce decree are crucial to ensure it qualifies for tax-free treatment.

Great post Micahel. The part about common sense going out the window when taxes are really high I have experienced first hand and in my prior career in tech personally did. I ended up losing several 100s of thousands of my own money because I was tricked by a promoter of a certain tax strategy. 

For the STR loophole strategy id love your thoughts on clients claiming STR loophole status one year, then turning it into an LTR the next year. It seems to me that a lot of folks think that is okay and I don't have perfect clarity on it.

Quote from @Rashad George:

This is my first year doing LTR and I'm looking for a tax professional who is knowledgable in REI. Are there good ones that anyone would recommend in or near SAT?

I'm also wondering what process people followed to find the tax professional that works best for them. Thanks in advance for any help!

 Hey Rashad! You may want to consider someone who is not local, but is familiar with your state. Also since its your first year doing LTR, you may not need someone who can provide a lot of bells and whistles which will cost you a pretty penny. I would recommend reaching out to folks providing value in the forums to see if they are taking on new clients and go from there. Best of luck in your search! 

Quote from @Ting Liu:

Thanks for the advice! We never filed any partnership return. That's a huge mistake. I don't know what to do now. May I pay the entire tax and give my partner the half of what is left?

 So lucky for you partnerships dont actually need to be filed with the state, they can even be oral in nature. What would need to happen is your tax pro would need to assist with a 1065 partnership return for both of you (ideally) to ensure its being done right. There is no magical way for him to receive the income either, you can simply just pay it to him from the bank account. It all comes down to how its characterized on the tax return and 1065 

Quote from @Rene Hosman:

Quote from @Account Closed:

Quote from @Ben Einspahr:

One of the most common house hacking strategies in the Denver metro area is the Airbnb House Hack. That consists of buying a single family home with some form of separate living space to rent out as a STR and help offset living expenses.

The Downside

• Lenders Calculate STR/MTR Rental Income Differently- From a lender's perspective, any rental income received on a term less than 12 months is NOT calculated the same way a traditional long term rental is.
• FYI-  for a long term rental, a lender will consider the income right away (75%) if there is a signed lease agreement or an appraiser' estimate 
• STR/MTR Income Must Show Up On Your Tax Returns- Before a lender can recognize that income for underwriting to offset your DTI, they must see it reported on a schedule E on your most recent tax returns.

So, What Does All Of This Mean?

If you purchase House Hack #1 (an Airbnb House Hack) on January 1, 2023, you cannot purchase House Hack #2 until you receive your tax returns back in early 2024, assuming you need that rental income to offset your DTI.

What's Next?

• Report Your Income!- Properly document your rental income on a schedule E and report it to the IRS.
• Connect with an Investment Friendly Lender- Not all lenders are equal. Connect with a lender familiar with your investment strategy to set yourself up for success and continue building your house hack stack.

I recently interviewed a local lender to dive deep into these details and talk about all the nuances. Happy to share the recording.

One downside I see to this strategy from a tax perspective: You are unable to take advantage of the STR loophole which is a massive offset of your tax liability for many folks. For high income earners, they may want to do an STR and a house hack separately rather then doing this as the net net of it all may actually be higher in some cases.

While you can't take advantage of the STR loophole if you're house hacking, you cannot have an STR at all in Denver unless it's your primary residence so it's a bit of a catch 22!

So STR loophole there are personal use limitations:

To avoid having the property classified as a "residence," which limits your ability to claim rental expenses, your personal use of the property must not exceed the greater of:

14 days per year, or 10% of the total days the property is rented at fair market value