All Forum Posts by: Aaron Zimmerman

Kara,

You've absolutely come to the right place with BP. I'd recommend reaching out to people in the forums or using the tax pros find here. There's a lot of quality CPAs on here that can assist as it pertains to your situation.

The way form 8582 will work is you show loss you have. The loss would be calculated as income less total expenses (including the 481(a) adjustment). Your income affects the deductibility of the loss. If you have under $100k MAGI, you can take up to $25k in loss against active income. The rest would roll forward into future years. 

Given your timeline, I'd recommend extending your return to get this right and to work with a tax professional.

Please note that this is not tax advice specific to your situation. 

Agreed with @Ashish Acharya. You will want to talk with your CPA about if the S Corp is best. A lot of times, it's best to start out as an LLC and then convert over to an S corp if there are enough profits. The election can be made retroactively.

It depends What your highest leverage activity is? Is it getting Better at your job so you have more room to afford to purchase property or is it acquiring rentals that are break even? I’d try to get more cash or buy deeper for properties. Easier said than done in this market.

House hacking is also a great way to acquire buildings via low down payments assuming the building can cash flow after leaving. Chicago has an abundance of 2-4 units. 

BiggerPockets is the right place to come. I’d recommend the find a tax pro feature and connecting with a few. Otherwise, you can scour through the forums. 

Your ability to deduct rental losses comes down to income if you're a w-2 employee and only have long term rentals. If you have short term rentals, there's opportunities to deduct losses from STR activity against active income.

Assuming you can still cash flow reasonably well, I doubt you’ll regret owning in Lincoln Park which as you know is an A+++ area. 

I would make sure your rents are in line with market. In addition, if you’ve been trying to rent out over the last couple months, that’s the hardest part of the year to rent out in Chicago. 

I would consider investing in real estate notes or a debt fund. This is generally taxable interest income and can offer a decent rate of return. Rental property is not great in a SD IRA. You may have to pay UDFI which relates to the amount of debt financed on the property.

Agreed with the others in this post. You need to get with your cpa to discuss. Section 179 is generally limited to the business income of the entity. 

It  depends if the property is in service or not. If the property is in service (advertised for rent), you can maximize the de minimis safe harbor rules which is where the $2,500 per invoice or per item comes into play. You’ll want to discuss with your cpa how that applies to you. 

Your plan to maximize the benefits of the cost segregation study seem great. 

It  really depends what your overall goals are but I’ve found that S Corps are beneficial at this income range. As others have said, you’ll save some self employment tax but the key is a reasonable wage that you must pay yourself from your s corp if you decide to go that route.