How the New Tax Code Affects REI w Amanda Han and Brandon Hall

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How the New Tax Code Affects REI w Amanda Han and Brandon Hall

BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes

Big changes are underway in the U.S. tax code—and it could make a huge difference to your bottom line. Thankfully, today on the Big gerPockets Podcast, we get to sit down with two CPAs who focus entirely on helping real estate investors navigate the tax code! Amanda Han and Brandon Hall join us today as we dive deep into the new changes—plus tackle some of the most common questions new real estate investors ask!

Remember a few weeks ago when we asked for your questions? THIS is the episode that answers them!

Listen here or on your favorite podcast player.

[email protected]Podcast Guest on Show #261

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Logan AllecBusiness Member

Accountant · Los Angeles, CA · Member since 2014 · 1k+ posts · 980 votes

This was a great podcast! Thank you, @Amanda Han and @Brandon Hall!

@Brandon Hall I have one question for you. At 22:00 you gave an interest limitation example of you and your dad, just you and him, forming an LP with your dad as the 50% money guy, i.e., not involved in managing the business. I'd assume that if it's just you and him, and he's the money guy, then you would actually be running the business.

I'm thinking that if you, as his son, actively participate in the management of the business, then his interest would not be treated as a limited partnership interest for purposes of the interest limitation rules and so you would not be treated as a tax shelter and so the interest limitation would not apply.

I could be wrong, but my reading is that the definition of "tax shelter" under Section 163(j)(3) (the interest limitation section) refers to Section 448, and 448(d)(3) refers to 461(i)(3), which gets you to 1256(e)(3), which says that an interest in an entity shall not be treated as held by a limited partner for any period if during such period such interest is held by the spouse, children, grandchildren, and parents of an individual who actively participates at all times during such period in the management of such entity (1256(e)(3)(C)(ii)).

Thoughts?

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Susana L.
Accountant · Newport Beach, CA · Member since 2018 · 22 posts · 13 votes
8y
Thank you so much for all the info you've shared in this episode! SO HELPFUL!!! Would love it if you had these two awesome accountants on the show regularly or maybe even mini episodes of Q&A. I'm a big fan and appreciate all the info. As always.
7 Reply
Kim Stofan
Realtor · Rocklin · Member since 2016 · 128 posts · 67 votes
8y
Such a useful and educational podcast. I'm so glad that people like Amanda Han and Brandon Hall are out there to assist with the confusing and convoluted tax codes and loopholes. Now I need to listen about 3 more times to get a good grasp on all the information discussed...
4 Reply
Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
8y
One of the best podcasts in a long time, although I am not sure how you got them on during tax season. Thanks @Amanda Han and @Brandon Hall for the great information explained clearly, so the average person can understand!
3 Reply
Logan AllecBusiness Member
Accountant · Los Angeles, CA · Member since 2014 · 1k+ posts · 980 votes
8y
This was a great podcast! Thank you, @Amanda Han and @Brandon Hall!
@Brandon Hall I have one question for you. At 22:00 you gave an interest limitation example of you and your dad, just you and him, forming an LP with your dad as the 50% money guy, i.e., not involved in managing the business. I'd assume that if it's just you and him, and he's the money guy, then you would actually be running the business.
I'm thinking that if you, as his son, actively participate in the management of the business, then his interest would not be treated as a limited partnership interest for purposes of the interest limitation rules and so you would not be treated as a tax shelter and so the interest limitation would not apply.
I could be wrong, but my reading is that the definition of "tax shelter" under Section 163(j)(3) (the interest limitation section) refers to Section 448, and 448(d)(3) refers to 461(i)(3), which gets you to 1256(e)(3), which says that an interest in an entity shall not be treated as held by a limited partner for any period if during such period such interest is held by the spouse, children, grandchildren, and parents of an individual who actively participates at all times during such period in the management of such entity (1256(e)(3)(C)(ii)).
Thoughts?
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Website View Page
8 Reply
Brandon Hall
CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
8y
@Logan Allec your interpretation of the code is correct. We aren't expecting technical guidance to change the treatment of family held entities under IRC 1256. My example was an attempt to explain that the new interest limitation will affect a ton of people, not just the big guys. Shouldn't have used my father, rather a friend instead :)
3 Reply
Garrett Diegel
Rental Property Investor · NV · Member since 2014 · 241 posts · 85 votes
8y
Looking forward to this one. Tax time should be everyones favorite time of year. You get to tell the government to give you money. Who doesn't love that.
3 Reply
Lee Gierszewski
Investor · Bismarck, ND · Member since 2017 · 110 posts · 50 votes
8y
Man I can't wait to listen to this episode tomorrow during my car pool to work!
2 Reply
Kelsey Breedlove
CPA and Real Estate Investor · Norman, OK · Member since 2017 · 16 posts · 19 votes
8y
As a CPA it's great to see quality tax pros like Amanda and Brandon out there giving solid and useful advice! Go team go!!
5 Reply
Andrew SyriosPro Member
Moderator
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
8y
Great podcast and very helpful!
Podcast Guest on Show #121
3 Reply
Marc Izquierdo
Investor · Bristol Borough, PA · Member since 2016 · 135 posts · 53 votes
8y
Great episode. Very thought provoking. If anyone knows a good CPA in eastern PA/Philadelphia, I'd like to take Brandon's advice and find a CPA early in my career.
1 Reply
Jeff WhiteBusiness Member
Realtor · Denver, CO · Member since 2016 · 278 posts · 371 votes
8y
@Brandon Hall & @Amanda Han
Thanks for sharing such wonderful information for us investors. It is really great to hear from two CPAs that also invest in real estate.
I will have to listen to this podcast again. I will definitely also review bonus depreciation with my CPA since I'm finalizing my taxes.
Most real estate investors really need to listen to this podcast. It is very applicable whether you have one property or one hundred properties.
2 Reply
David T.
Real Estate Investor · Orange County, CA · Member since 2013 · 39 posts · 4 votes
8y
Thank you Amanda and Brandon for your insights and knowledge of this issue. I think it's time for me to get a CPA and help me learn more about tax saving strategies.
4 Reply
David JasonPro Member
Alexandria, VA · Member since 2016 · 11 posts · 2 votes
8y
Great podcast. I have a follow up question about the bonus depreciation. We purchased our first SFR in December 2017; however, didn’t purchase the appliances until 2018. Do I apply the bonus depreciation to my 2017 or 2018 taxes?
1 Reply
Mike Neubauer
Rental Property Investor · Waikapu, HI · Member since 2018 · 305 posts · 197 votes
8y
Great podcast. I learned a lot and hope my current CPA was listening! If not, I may need to call up @Amanda Han or @Brandon Hall!
1 Reply
Yonah WeissPro Member
Cost Segregation Expert and Investor · Lakewood, NJ · Member since 2017 · 1k+ posts · 1k+ votes
8y
Originally posted by @David Jason:

Great podcast. I have a follow up question about the bonus depreciation.
We purchased our first SFR in December 2017; however, didn't purchase the appliances until 2018.
Do I apply the bonus depreciation to my 2017 or 2018 taxes?
David, I'm assuming this is an investment property. You can use bonus depreciation for 2017 only on the 5 (and 15)-year property items that were already there. So the appliances that you purchased in 2018 can be deducted with bonus depreciation only on 2018 returns.
BUT...If there were appliances or any other 5-year property that can be identified (preferably with a qualified engineer), you can deduct them with 100% bonus depreciation, even if you discarded them for new ones a month later.
1 Reply
Yonah WeissPro Member
Cost Segregation Expert and Investor · Lakewood, NJ · Member since 2017 · 1k+ posts · 1k+ votes
8y
Originally posted by @Marc Izquierdo:
Great episode. Very thought provoking. If anyone knows a good CPA in eastern PA/Philadelphia, I'd like to take Brandon's advice and find a CPA early in my career.
Marc, I know a great CPA in Philly, as well as several Virtual CPAs who work nationwide like @Daniel Hyman and his firm My online accountant. PM me if you would like contact info.
2 Reply
Mark Hughes
Rental Property Investor · Aurora, CO · Member since 2018 · 288 posts · 117 votes
8y
Great podcast. I bought Amanda’s book and have listened to 2 of her podcasts now. I particularly enjoy Brandon and Amanda’s commentary and rapport back and forth. I too have made plenty of mistakes, and missed out on many tax savings and advantages over the years but it’s great to hear that I am not alone and that there’s opportunities to jump on now to improve and educate as you go. #ittakesavillage....of rentas ;)
1 Reply
Brian AguirrePro Member
Investor · Atlanta GA Charlotte NC Tampa Fl · Member since 2017 · 4 posts · 2 votes
8y
Awesome podcast
0 Reply
James LetchfordPro Member
Rental Property Investor · WY · Member since 2016 · 87 posts · 51 votes
8y
Wow. This podcast was very informative. I'm putting one of my properties through a full renovation right now, so the concept of 100% depreciation at onset will really help me out. Further, I'm loving the BARRRR concept, too. Thank you @Amanda Han, @Brandon Hall, @Brandon Turner, and @Scott Trench. True gold.
1 Reply
Amy KendallBusiness Member
Real Estate Broker · Lehi, UT · Member since 2016 · 397 posts · 318 votes
8y
I thought the podcast was amazing! At first, I wasn't sure how they were going to make a podcast about taxes interesting, but it was very entertaining and informative!
1 Reply
James Peters
Thousand Oaks, CA · Member since 2016 · 48 posts · 9 votes
8y
Thanks for a great podcast @Amanda Han and @Brandon Hall! I took to heart what you said about getting an itemized list of upgrades/repairs to a property that I am getting ready for being a rental. I am talking to several contractors I was referred to and they will not break things down by item in their estimates. Any suggestions on how to get them motivated to do that?
0 Reply
Brandon Hellenbrand
Multi-family Investor · St. Charles, MN · Member since 2013 · 5 posts · 0 votes
8y
@Logan Allec
In your post regarding "tax shelter" where llc members are related by family and each participate in the business, would each member be considered a general member on schedule k-1 for section G? If so, then the interest limitation would not apply?
0 Reply
Christy Browning
Real Estate Investor · Denver, CO · Member since 2017 · 31 posts · 19 votes
8y
Loved this podcast: it was incredibly helpful and clear! Thank you to @Amanda Han and @Brandon Hall for sharing your expertise and advice. Thank you also to Brandon and Scott for your pertinent questions that helped delve into specific details that us investors were hoping to hear more about!
0 Reply
Raj Sid
Rental Property Investor · Irvine, CA · Member since 2017 · 25 posts · 4 votes
8y
Bonus Depreciation.
If i purchase a new construction as investment and put in service for rental, upgrades on top of the base price of the House(As sold by builder), can I deduct it on year 1?
0 Reply

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