Tax Basics for the new investor

Tax, SDIRAs & Cost Segregation
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Tax Basics for the new investor

Jessica Freese
Rental Property Investor · Atlanta, GA · Member since 2018 · 73 posts · 18 votes

Hi,

I need to get a high-level understanding of how investing in RE is going to affect my tax situation.  Any suggestions for where to go for a primer, either online or books?  I currently do not have any W2 work, but my husband is 100% W2.  I'm looking primarily at buy and hold for now.  Thanks!

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Matt A.
Realtor · Minneapolis, MN · Member since 2012 · 27 posts · 11 votes
8y

Have you checked out the book on taxes in the BP store?  

https://www.biggerpockets.com/store/the-book-on-ta...

The authors of the books have also been on the BP podcasts a few times and they have company websites that I've found useful to look at for understanding taxes a bit more.

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  • Matt A.
    Realtor · Minneapolis, MN · Member since 2012 · 27 posts · 11 votes
    8y

    Have you checked out the book on taxes in the BP store?  

    https://www.biggerpockets.com/store/the-book-on-ta...

    The authors of the books have also been on the BP podcasts a few times and they have company websites that I've found useful to look at for understanding taxes a bit more.

    2Reply
  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    8y

    @Jessica Freese , 

    Lucky you, this actually can be very beneficial for your taxes.

    1) If you husband makes less than roughly 100k,  the loss from rental can offset 25k of husbands' W-2 Income.

    2) Even if he makes more than 100k, Since you dont have a W-2 Job, with careful planning, you can qualify for RE professional status, that will help you use the entire loss from rentals against husbands' W-2 Income 

    3) You can convert some of your personal expenses into business expenses with the home office deductions, transportation expense ( mileage, depreciating computers, furniture, and other assets used for the rentals, and few more. 

    4) You can hire your kids and funnel money within the house if planned carefully. 

    Those are some obvious benefits.  There can be much more. 

    All the books here at BP are great. Please look at the Store tab. If you have a specific question let me know, I am from GA too. :) 

    [email protected]941-914-7779
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  • Jessica Freese
    OP
    Rental Property Investor · Atlanta, GA · Member since 2018 · 73 posts · 18 votes
    8y

    Thank you, guys!  I saw the Tax Savvy book on BP, but wondered how much has changed with the new tax laws this year?  Is that book still relevant?  (Sorry to the authors for the question, I'm sure it's a fine book!)

    Ashish, when you say "loss," maybe that is a tax word I don't understand. I'm hoping not to lose any money with real estate investing!  

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  • Jessica Freese
    OP
    Rental Property Investor · Atlanta, GA · Member since 2018 · 73 posts · 18 votes
    8y

    Matt, I started to listen to the latest podcast with Ms. Han but I'm a little ashamed to admit my eyes glazed over and not sure I understood it all.  I didn't know there was an earlier podcast with her.  I'll go look it up.  Thanks! 

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  • Matt A.
    Realtor · Minneapolis, MN · Member since 2012 · 27 posts · 11 votes
    8y

    Check out the podcast from a few weeks back.  They answer what's changed in the new tax laws and if the book is still relevant :)  I'd look for their (Amanda & Brandon's) other podcasts too and see if those can give you answers to some of your questions.  Or ask any of the CPAs on here that I'm sure can help answer questions too!

    https://www.biggerpockets.com/renewsblog/biggerpockets-podcast-269-how-the-new-tax-code-affects-your-real-estate-investments-with-amanda-han-and-brandon-hall/

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    8y
    Originally posted by @Jessica Freese:

    Thank you, guys!  I saw the Tax Savvy book on BP, but wondered how much has changed with the new tax laws this year?  Is that book still relevant?  (Sorry to the authors for the question, I'm sure it's a fine book!)

    Ashish, when you say "loss," maybe that is a tax word I don't understand. I'm hoping not to lose any money with real estate investing!  

    Sorry, Let me briefly clarify. Good thing about rentals is that you can have positive cash flow but loss for tax purpose because of a depreciation. The Depreciation is know as phantom expense. 

    [email protected]941-914-7779
    INVESTOR FRIENDLY CPA®5241 Reviews
    WebsiteView Page
    TaxMD™ | AI-Powered Tax Planning
    WebsiteView Page
    1Reply
  • Brian Schmelzlen
    Accountant · La Mesa, CA · Member since 2017 · 477 posts · 476 votes
    8y

    Hi Jessica,

    If you do not currently work with a CPA, you probably will soon because it sounds like your tax situation will become a little more complicated.  A lot of DIY tax software is good, but it does require a decent understanding of the tax law to ensure that you are not missing big tax deductions.

    I would consider reading information that CPAs put out for free on their blogs (you will find a number of good articles through a simple google search).  From there, I would suggest meeting with a CPA (one who offers a free consultation for potential clients).  That way you can ask questions once you narrow down what is relevant to you.

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