CPA & taxes

[Jonathan Bebey]

Hello phoenix area,

I am looking for a CPA to help with my taxes for my house hack that I bought April of 2023. Does anyone have any recommendations? Thanks! 

[Ryan Thomson]

@Jonathan Bebey i agree with Andrew to find someone local. Here is a list of things to talk about with your CPA:

Qualified Business Income Deduction (QBID)

Qualified Business Income Deduction. If you’re a real estate investor, you could potentially deduct up to 20% of your rental income through QBID. This can help lower your taxable income and increase your overall profitability. You have to meet some criteria, but the first 20% of your income could be tax free.

Depreciation

This is a method of writing off the cost of your rental property over a period of time, 27.5 years for residential properties and 39 years for commercial properties. By taking advantage of depreciation, you can reduce your taxable income and keep more of your hard-earned profits.

Let’s break this down. Let’s say you buy a home for 300k. The land is worth 25k and the home is worth 275k. You are allowed to depreciate the cost you paid for the home (275k) over 27.5 years. 275k/27.5 = 10k. Each year you can use this depreciation to lower your taxable rental income by 10k.

If you were house hacking a duplex. You cannot depreciate your side of the unit. But you can depreciate the percentage of the square footage that is used as a rental. So at 50% of the duplex being a rental, you could reduce your taxable rental income by 5k/year (per the example above). You could also do this for bedroom rentals by taking the percentage of the bedroom rental square footage to the entire house.