out of state rental taxes

Tax, SDIRAs & Cost Segregation
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out of state rental taxes

Patrick Mullin
New to Real Estate · Springfield, MO · Member since 2019 · 5 posts · 3 votes

Hi all,

Me and a partner finally got an offer accepted on 2 SFH. I'm located in Springfield, MO, and the partner and properties are located in the Biloxi, MS region. Given that I'm out of state, I know that I'll likely need to file MS state taxes. Would it be best for me to hire a local CPA in Missouri, or to get my partner to talk to someone in Mississippi.

Also, if we are splitting equity and rental income 50/50, are deductions and depreciation divided up equally? 

Additionally, if anyone has a recommendation for a real estate CPA in Springfield (or even KC/STL) or in the Biloxi area, that would be appreciated. 

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Linda WeygantPro Member
Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
5y

The location of your CPA isn't important.  Many tax professionals run completely virtual firms.  

What is important is their knowledge of taxes associated with your type of investing.  It's not clear if your houses in MS are flips or rentals.  But you'll want to make sure that whoever you go with knows the tax issues associated with it inside and out.  There are several qualified tax professionals on Bigger Pockets.  Your best bet is to reach out to a few and see who you like best.  Ideally, you'd ask your partner to use the same professional for the real estate because having the full picture helps your tax pro to provide you with the best advice

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  • Linda WeygantPro Member
    Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
    5y

    The location of your CPA isn't important.  Many tax professionals run completely virtual firms.  

    What is important is their knowledge of taxes associated with your type of investing.  It's not clear if your houses in MS are flips or rentals.  But you'll want to make sure that whoever you go with knows the tax issues associated with it inside and out.  There are several qualified tax professionals on Bigger Pockets.  Your best bet is to reach out to a few and see who you like best.  Ideally, you'd ask your partner to use the same professional for the real estate because having the full picture helps your tax pro to provide you with the best advice

    Podcast Guest on Show #244
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  • Patrick Mullin
    OP
    New to Real Estate · Springfield, MO · Member since 2019 · 5 posts · 3 votes
    5y

    Thanks Linda,

    They're both currently occupied rentals that we are okay with leaving as is until turnover of tenants (CoC 20-23%). Once one leaves, we may go in and update a few things. It seems straight forward, but the different state income is the curve ball.

    Thanks again for the help!

    0Reply
  • Alex Olson
    Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
    5y

    @Patrick Mullin I would recommend that your partner in MS find a really good but reasonable real estate CPA that understands real estate (sounds easy to understand, but it is very important to not just use a friend or family). Hope that helps!

    1Reply
  • Patrick Mullin
    OP
    New to Real Estate · Springfield, MO · Member since 2019 · 5 posts · 3 votes
    5y

    Thanks Alex. I've done all my own taxes to this point, but they're pretty straight forward as a W2 earner with tax deferred and taxable investment accounts. I read both BP tax strategy books, and if nothing else, they've taught me the importance of good book keeping, tax planning, as well as getting a good real estate CPA. 

    @Alex Olson- unrelated, but given that I'm in Springfield, I'll keep you in mind if we/I decide to make some real estate moves in MO. Thanks! 

    0Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    5y

    @Patrick Mullin

    How do you and your partner own the properties? Through an entity(LLC, partnership, etc) or as tenants in common(personally in both your names). This will indicate how the income/expenses will be reported.

    In general, you may have to file MS tax returns going forward since you have income/expenses earned within the state.

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  • Patrick Mullin
    OP
    New to Real Estate · Springfield, MO · Member since 2019 · 5 posts · 3 votes
    5y

    At this point, we will just be tenants in common. We wanted to actually land a deal before going through the LLC work. We are anticipating closings in early 2021, so that should give us time to get a LLC setup. That also gives us some lead time for tax planning.

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  • Bill HamptonBusiness Member
    Accredited Investment Fiduciary, AIF®, Financial Planner, Tax Strategist, Real Estate Investor · Atlanta, GA · Member since 2012 · 2k+ posts · 978 votes
    5y

    Patrick, 

    Are you open to working with your accountant remotely? I recommend finding an accountant who specializes in real estate taxation over one that is local. You may want to consider working with your accountant remotely to expand your options.

    I would also recommend looking for a tax strategist who is willing to work with you throughout the year, not just when preparing your tax return. You want an accountant that can help you strategize and who is responsive when you want to know the tax consequences of the decisions you are making throughout the year.

    Good luck and let me know if you have any questions.

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  • Alex Olson
    Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
    5y
    Originally posted by @Patrick Mullin:

    Thanks Alex. I've done all my own taxes to this point, but they're pretty straight forward as a W2 earner with tax deferred and taxable investment accounts. I read both BP tax strategy books, and if nothing else, they've taught me the importance of good book keeping, tax planning, as well as getting a good real estate CPA. 

    @Alex Olson- unrelated, but given that I'm in Springfield, I'll keep you in mind if we/I decide to make some real estate moves in MO. Thanks! 

     I appreciate the shout out!

    1Reply
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