Want to Talk Tax? Upcoming Podcast Episode Needs Your Questions!!

123 Replies

An upcoming episode of The BiggerPockets Podcast will feature BOTH @Amanda Han and @Brandon Hall answering YOUR questions about taxes - the new tax laws and how they affect regular people AND real estate investors.

What do you want to know? Ask away!

Everything surrounding Depreciation and advertising homes for sale.

Can rental property investing have tax benefits for the income I earn as a self-employed professional (through my own LLC)? Or is the tax advantage mainly in the equity and cashflow generated from the rentals themselves?

1) In a recent blog post on Biggerpockets.com, Amanda mentions the new tax reform provides certain flow-through business income with a 20% deduction, which essentially makes 20% of the profits tax-free. Does this apply to income earned as: 

(a) independent contractors (realtors, etc.) 

(b) employees (W2 earners)

(c) rental property income (Schedule E)

(d) all of the above 

2) What, if anything, needs to be done to take advantage of this benefit? 

As a buy and hold real estate investor or flipper, how do I know if I need to submit a 1099-MISC to one of my contractors/inspectors/etc.? When must this be completed and what is the penalty if I do not do this? Asking for a friend. ; P

Hi Mindy my name is Catherine Wyman. I have worked for a 81 year old commercial real estate broker in the South Florida area for 7 years.I worked as her assistant while pursuing my real estate license. I left last week as her personal problems and disfunction was too much to stand.

 I have always taken out 7.65% out of each and every paycheck ( Always typed an invoice which was paid by the broker. After I left last week I requested my W2 from her accountant who informed me she told him I was an "independent contractor" I was in shock! I told him I didn't know this and this was " tax evasion" and needed this fixed right away. I then took the time to pull out all the proof I had which was only a few different months which I then made an excel sheet with monies paid before and after taxes up to the last day I worked last week. I informed him I was furious as I am a single mom of two kids and now with no income while I study for my license I run into this problem.  I asked him to please check all the copies of checks she sent him againts what I provided. He said this will prolong the process but he will get on it. Please help.

P.S. Please email me with the time and date this podcast will be on. Thank you.

You need to Submit a 1099 miscellaneous if you’re paying them about $600 over the course of one year

We’re considering forming one Umbrella LLC that owns all of our LLC’s, each of which owns each individual property. We want to do this so that we can just file once under the Umbrella LLC. Is this a good way to go for tax purposes? Any concerns or complications that you might see?

Thank you!!

Julian and Sharon (eating dinner at Mod Market on 16th and Champa 😊)

While a bit morbid, a discussion regarding the inheritance tax would be useful. It can be very high, and if you have a lot of mortgages, and can be tough to handle. I know many firms companies have basically gone bankrupt because of it. 

@Mindy Jensen A hot topic that my colleagues and I, here on BP as well as offline, have differing opinions, a vague ruling in the new tax reform: 1031 exchanges are no longer allowed for personal property, only for real property. 

Does this apply to personal/tangible property (1245) within real property? If so, (as ridiculous as it may sound) is there a new form on the 1031 document, which requires you to list all personal property and it's value, and deduct that from the amount you are allowed to exchange?

I would say 1) When setting up a partnership for buy-n-holds where one partner brings the down payment funds and one does all the 'work' and they are forming a 50-50 partnership, are there details of how to set that up to minimize taxes, particularly for down the road when selling? 2) What are the tax benefits to selling using "owner financing" or similar for the seller, and what do they need to be aware of such as depreciation recapture being due (?) at time of sale 3) What to be aware of when buying or selling shares of multimember LLCs that own real property.

Sounds like a great show!

Dan Dietz

I have a duplex that i bought 11 months ago. I live on one side and rent the other. One side is taxed as rental by the county. Can I write off all of my interest or is everything split in half? It's kinda confusing.

What if any advantages for my stay at home wife to be the real estate professional if we are under the income threshold that would disallow our passive losses. 

@Mindy Jensen I house hack in my duplex. I am learning that the homestead tax exemption doesn't apply to my full property since I rent the other side out. Is there a way I can still qualify for homestead exemption without getting in trouble with the county?

Just general basics and hacks everyone should use for their taxes.

Could someone please help me with below tax question?

After my previous tenants moved out, I paid $2700 for interior painting my rental house. How will I claim this money on Tax return?

Thanks,
Jane

- Is it true that the $750k cap on MID does not apply to rental properties?

- What if I'm 'house hacking' a fourplex, and live in one of them? How will the MID cap apply, in that circumstance? 

- If you are a CPA and I'm taking you out on a date, can I 2106 that? What if I bring my puppy?

- If I have a $750k mortgage on my primary residence, and take out a $100k HELOC to acquire and/or improve a rental property, can I write that mortgage interest off? 

- I'm a mortgage guy and my tax pro said that I can't write off business expenses, like paying for HOA nonsense paperwork on behalf of my clients, unless all the nonsense (2106 expenses) I paid for is at least 2% of my income. Is that right? Seems like an incentive to stop giving my clients this gold-star treatment that no one else in my industry gives them. 

- What's the best cell phone app for Realtors to track "miles driven" on IRS Form Schedule C, page 2, part 4, line 44, box A? And, what do I have to do in order to get you to shove it all there, and not on IRS Form Schedule C, page 1, part 2, line 9? This difference consistently screws Realtors over when they personally apply for a mortgage.

- Why are you tax professionals a bunch of communists? 

- What is my MID cap on a 'second home'? Is this cumulative with my primary residence? 

- Are you the devil?

- If I finance a purchase as a 'second home,' that I mostly rent out, can I write off that mortgage interest? 

- Will you please write this boilerplate "CPA Letter" confirming that Jessica using all her business funds for her down payment is 100% guaranteed to have zero impact on her business? I just need you to docusign, I've already written the letter and taken the liberty of including your own letterhead. We will insert the homebuyers name later on, it's no biggie that the name is blank, don't give it any thought sweetie pie, please docusign by 3 pm tonight or you hate your client. I'm certain that such a letter will expose you to absolutely NO liability at all!

- My mortgage professional buddies and I have been joking that we should never buy a home to ourselves live in, we should just buy investment properties and rent them out to each other, so we can write all that stuff off. Is this, indeed, what the tax code now incentivizes? 

- Can I depreciate beard expenses that are necessary & vital for my practice? Am I depreciating the beard, or the tools that make the beard? 

- What do real estate agents need to know about the impact of tax reform on them? 

- Why do you hate puppies? 

- The good ole "joint tenants" v "community property" debate. Suppose I am married and I die tomorrow, our rental property  having appreciated a zillion percent because it's in downtown Oakland. What's the difference, and how did tax reform impact it?

I wear aviators and a beard, so you know that I am one thousand percent serious in everything that I say. In case you were wondering. 

@Mindy Jensen my fantasy is that you go ahead and read my above post, with a straight face, in order. :P

(You can replace "guy" with "gal," and I will forgive you!)

Usually I do my own taxes and am fairly comfortable with them.  I only have one rental right now to claim depreciation on.  Is it worth it to pay someone to try and catch more tax breaks or should I wait until I own more to do this?

@Mindy Jensen With the advent of technology and TurboTax :), is it advisable to file one's Schedule C using TurboTax even if you have multiple LLCs for the different Real Estate activities? Or always use a CPA?

Thanks! - Ola Dantis

I have several homes... I would like to put each of them into a LLC (1 LLC for each house)... and would like to have an LLC as the holding company of all the other LLCs so that I can have just 1 bank account where all the income and expenses would flow into and out of. Is this a good structure? Any advice? Thank you!

I would like to hear more on the mortgage deduction limits. Overall and generally speaking!

Mindy - You rock!

I've heard in the new tax bill that HELOCs and Home Equity loan interest in not tax deductible.  Also heard that it may be in certain situations.  Can we get a clarification on that?

There are blogs out there (https://www.gocurrycracker.com/never-pay-taxes-again/) where people stay under the minimum income requirements to stay under the 12% (using 2018 tax brackets) tax bracket where they pay a capital gains tax of 0% when they sell their stocks and pay no taxes for the year and live off of stock dividends and the proceeds from selling stocks, which they paid 0% taxes on. I want to do the same but with real estate income, doing this strategy with stocks means you can't have more than $50,700 in income (38,700 to stay in the 12% tax bracket where capital gains are taxed at 0% + $12,000 standard deduction using 2018 numbers) but is there a way to do this with real estate income? What is the maximum an individual can earn in rental income in a year and still not have to pay taxes?

Could you please go into the tax advantages/strategies for a first time house hacker collecting border income? What all could you potentially write off as business expenses? 

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