New Book!!! Tax Strategies for the Savvy Real Estate Investor

74 Replies

BiggerPockets is excited to introduce its newest book, The Book on Tax Strategies for the Savvy Real Estate Investor

Taxes! Boring and irritating, right?

Perhaps. But if you want to succeed in real estate, your tax strategy will play a HUGE role in how fast you grow. A great tax strategy can save you thousands of dollars a year - and a bad strategy could land you in legal trouble.

In order to get the book out in time for this year's tax season, it is currently only available electronically. Order your digital copy here.

@Mindy Jensen

Does it include a chapter on self-directed solo 401k investing?

@Mark Nolan there is a chapter on Self-Directed 401(k) AND Self Directed IRAs. I'll tag @Amanda Han here, too.

Does your new book explain how the UBIT (unrelated business income tax) for self directed IRAs come in to play on a fix and flip transaction or other real estate transactions?

this book is ridiculously addicting, I started reading it last night till 3AM in the morning, continued plowing through the remaining chapters first thing in the morning. I'm stuck at page 101, my head is spinning trying to figure out the difference between Capital Loss vs. Ordinary Loss. 

If I'm understanding it correctly, the book is saying selling a property at a loss is considered ordinary loss, which allows investor to claim >$3000 on tax deduction. I'm not a tax expert by any means, not even close by nautical miles; but I did perform some online researches. The results seems to contradict with the book. can someone clarify the difference between the Capital vs Ordinary loss. @Amanda Han

below are some of the sites that i researched: 

INVESTOPEDIA DEFINITION

CASE STUDY

Very interesting book - I have not started investing yet but hope to start this year using an old 401k account.  It provides interesting info on how to do this

Great book! Amanda is an expert at what she does and after working with her helping few mutual clients I can say that she is employing those tax savings strategies when it comes to real estate investing and retirement accounts to full extend.  

Great book! Read it on my cruise vacation about 2 weeks ago. My family couldn't understand how I could read a tax book on vacation but I find this stuff so interesting haha

Thank you for this!

Nick from Windsor, did you find out the answer to your questions?

@Nick Liu

When you sell a property, the character of the gain will differ depending on what you are investing in.  For example, if you have a flip property that you are working on and you sell it at a loss, regardless of your holding period it will be considered an ordinary loss and will not be limited to the $3,000 per year.

In contrast, if you are sitting on a piece of land for a couple years, do not improve the property, and sell it for a loss, it will be a capital loss.  Capital losses are deductible to the extent that you have capital gains or $3,000 per year.

I haven't looked at the book and don't know the author but I would be a little concerned if it is not a tax professional who wrote the book.  I have come across good and a lot of bad tax advice on here.  Just because you did it one way and never got audited doesn't mean it is correct.  Investing with retirement funds is especially tricky, there are many prohibited transactions.

It could be a great book, if I wasn't stuck with my full time job and investing in real estate I would give it a quick read.  I have heard great reviews of prior books!

Clicking on the link, it looks like Amanda is a CPA.  

Nick - I would guess they are talking about a different type of investment than you were researching.

Hello, I bought this book a few weeks ago from BP and it let me download a PDF version of it. After uploading it to my Kindle the format makes it impossible to read as the font is extremely small. I noticed today that there is also a Kindle version now.

Given that I already paid for it, is there a way I can get access to the Kindle version? As it is now it is useless for me since I just can't sit in a computer display to read an entire book.

Thank you!

@Amanda Han

This is a great thread and thought I would throw out a question. I didn't see anyone talking about deduction limits once your modified adjusted gross income is above $100k if you are not a real estate professional. I purchased my first investment property last year and am working on getting my taxes together and am quickly realizing I am not entitled to nearly as many deductions as I was hopping. Does anyone have any advice to maximize your deductions in this situation? If anyone has dealt with this I would love to pick their brains!

This is a question for one of the authors of Tax Strategies for the Savvy RE Investor.  I'm almost half-way through reading the book - great information!  

Here's my question:  If all my RE business expenses are paid via credit card and I have the credit card statements (with the expenses documented via line item detail on the statements) - do I still need to have the actual receipts for each expense (or a photo of the receipts) in addition to the statements?  

If so, why?  It seems to me the credit card statements would be proof enough for the IRS.

Hi @Kyle Frey ,

I think what you are referring to is the Passive Activity Limit.  This only applies if your losses from rental property exceed $25,000.

Otherwise, you should have no restrictions on the deductions you can take for your rental property.

Let me know if I am misinterpreting your question and if so, please elaborate further.  I am happy to continue the discussion until you have a resolution to your question.

Ed

@Edmund Ricker thanks for your reply.

It is my understanding that there are restrictions on how much you can deduct based on your salary if you are not a real estate professional.

There is a really well written post by @Clayton Mobley here: https://www.biggerpockets.com/forums/70/topics/362...

  • I would love to be able to file under section C but I would have to be either a real estate professional (750 hours / year or more) or be providing more than a basic services to tenants (i.e., bed and breakfast, maid services, etc...)
  • Due to the fact that I don't qualify for either of the 2 situations above my rental losses can only be used to offset other sources of passive income. In this case my "loss" will be carried forward on form 8582 until I can legally use this loss, which will most likely be next year when I can write off the loss against my passive income. The problem for 2016 is due to the fact that I didn't have any passive income I have to basically store this loss until it can be used.
  • Contrary to my initial thought I originally thought I would be able to take full advantage of a fairly significant loss (~$20k) on the property in 2016. Due to my modified adjusted gross income being over $100k I am only eligible to carry roughly 30% of the loss through to my 1040. In fact once you make over $150k the allowance is eliminated entirely.

Let me know if I am misunderstanding this or if there are ways around this.

Kyle

@Kyle Frey ,

I agree with @Steven Hamilton II .  I believe you have the correct analysis based on the facts you have presented.

In cases like yours, I like to look on the bright side.  You don't lose the losses, you just have to wait to use them.  I consider that a high quality problem.  Sorry that the resolution is not more immediate.

Ed

Just wanted to put this out there. After some follow up, my library in Yorktown, va ordered in their very own copy of tax strategies for the savvy real estate investor!!! I'm excited for me and the others that can learn for it, and for the authors and publishers of this book to get their product and name out to a big audience.

Kyle,  depreciation is a huge deduction and mortgage interest, repairs and capital improvements.  There are tons of good deductions for real estate and a great reason why it is a great investment.

I've been reading Legal Loopholes in Real Estate, Edward Sutton, forwarded by Robert Kyosaki and it recommends self directed IRAs only in a roth because while you gain tax shelter, you lose depreciation which is almost as much when you consider that when you withdraw from an IRA, you pay at income tax rates which may be much higher than long term capital gains.

Originally posted by @Kyle Frey :

@Edmund Ricker thanks for your reply.

It is my understanding that there are restrictions on how much you can deduct based on your salary if you are not a real estate professional.

There is a really well written post by @Clayton Mobley here: https://www.biggerpockets.com/forums/70/topics/362...

  • I would love to be able to file under section C but I would have to be either a real estate professional (750 hours / year or more) or be providing more than a basic services to tenants (i.e., bed and breakfast, maid services, etc...)
  • Due to the fact that I don't qualify for either of the 2 situations above my rental losses can only be used to offset other sources of passive income. In this case my "loss" will be carried forward on form 8582 until I can legally use this loss, which will most likely be next year when I can write off the loss against my passive income. The problem for 2016 is due to the fact that I didn't have any passive income I have to basically store this loss until it can be used.
  • Contrary to my initial thought I originally thought I would be able to take full advantage of a fairly significant loss (~$20k) on the property in 2016. Due to my modified adjusted gross income being over $100k I am only eligible to carry roughly 30% of the loss through to my 1040. In fact once you make over $150k the allowance is eliminated entirely.

Let me know if I am misunderstanding this or if there are ways around this.

Kyle

I've always wonderied about that 750+ hour rule for active vs passive investors. That's for writing off real estate losses onto your W2s etc right?

Well if you hire property management like I do could you still claim 750 hours? I do managing management, and still do repairs, meet tenants, deal with turnover, and spend about 3 hours a day researching and planning for REI. So would all that qualify as the 750 hrs and be justifiable?

Hello @Kyle Frey .

I didn't see an answer for your question.

I am not a professional Tax expert but I think the answer is two fold.

You can document 750 hrs in the real estate actitivity, or

You can claim more than 50% time spent in Real estate.

With a full time job this is hard to do unless you are a RE agent.

I am retired, so easier to do.

Cheers,

Buddy

As a tax professional I just wanted to add my praise for the book. Aside from the obvious CPA worship (I am an Enrolled Agent, not a CPA) it was quite good. :-0

The authors should consider writing a book geared toward tax professionals. More meat not just on WHAT is possible, but WHICH forms you fill out and HOW would be useful. I pity the tax pro who has not read this book who has clients that have!

I ordered the "Tax Strategies for the Savvy Real Estate Investor" Book by @Matthew MacFarland and have almost finished reading.

It is a fantastic read. It covers about everything I have gleaned over my decade of doing my taxes with SFR properties and some new nuggets for me to explore. I am blown away by the section on Solo 401k rules!

My step son qualifies and I have sent him a heads up. I would love to use it but as a retired Investor I have no W2 or Schedule C income. Is there a way to qualify using pension, Schedule E, MRD IRA withdrawals?

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