Investor · San Diego, CA · Member since 2016 · 35 posts · 21 votes
I have had a lot of accountants, some good, some bad, but none of them will do anything but paperwork.
I'm ready for an aggressive accountant.
Where are the accountants that are going to tell me how to write off vacation expenses by buying a condo in the same city I like to vacation?
Where are the accountants that are going to recommend I employ my children so they can have 401(k)s and I can expense their salaries and they can contribute pre-tax?
Where are the accountants that are going to tell me how to stop managing my own rentals, and instead form an LLC so I can pay myself to manage them while writing off other LLC expenses like my computer?
I'm not saying I need to be all the way through the gray area into the black, but I'm tired of hanging out in the white area. Let's wade into that gray area. Keep it legal, keep it aggressive.
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
3y
Where? Right here, on this forum. There are over 20 of us here.
However, creating an LLC does not create any additional tax deductions for you. If you bought a computer and use it for business, it's deductible with or without an LLC.
Buying a condo out of town for tax purposes is not a tax strategy, it's foolishness. Buy it if owning a condo in that place is a solid investment AND you don't have better investment opportunities in your home town or elsewhere. Tax benefits are the icing on the cake, not the cake. And there're complex rules if you're planning to use that condo yourself periodically.
You employ your children if they can be helpful in your business AND you want to raise them as productive members of the society.
Hopefully nowhere. All this will do is take that wonderful passive income and turn it into ordinary earned income, subject to self employment taxes. Keep it simple.
Not quite. It takes an avoided passive expense (avoid property manager), creates a passive expense (property manager) and simultaneously creates an active income (self-manager LLC). That active income will be offset by the active expense (e.g., computer) of the LLC that would otherwise be a passive expense against the passive income of the property. To the extent FICA or SECA is involved, I'm already over the cap via w2 work so the bulk of it is not relevant and with careful planning, there should not be much actual net income.
Now the computer is an active expense, not a passive expense, and can be written off against substantial w2 money. One must now also account for hobby-classification rules and some other rules, but again, a significant net benefit can be created in particular situations with particular rules.
I largely agree with you though: Keep it simple! I've done that for 20 years. It worked very well. However, given my current tax burden and particular life situation, there is enough benefit to complicating things to justify the cost and time burden.
I hear you. I have an s-corp PMC for my properties just to have a little earned income and be able to contribute to an IRA and a defined benefit pension or solo 401 if I want it.
Most rookies think it's a good idea to pay themselves without need or an understanding of the consequences is why I brought it up.