All Forum Posts by: Ashish Acharya

With two income-producing triplexes in rural Ohio and a construction company under your control, you’re in a unique position to scale your portfolio efficiently while managing costs. At 36, your target to semi-retire by 40 is achievable if you combine conservative leverage with proactive tax strategy. Your properties already generate strong cash flow, and planned additional units can be built at favorable costs. The right tax planning can preserve more of your rental income, accelerate wealth building, and provide flexibility for future market shifts.

Tax-Optimized Strategy:

Your low-debt, high-cash-flow model is solid, but moderate leverage could speed up adding the 4 new units.

With no W-2, you can likely qualify for REPS, letting depreciation offset all income (track hours carefully — OBBA tightened enforcement).

Bonus depreciation is 100% in 2025, a cost seg on each build could front-load in deductions.

Capitalize construction costs from your company to boost depreciable basis.

Keep rentals in one LLC and your construction company as an S-Corp to reduce self-employment tax and preserve QBI deduction.

Watch property tax reassessment and appeal if needed.

Plan for depreciation recapture on sale; 1031 rules now have stricter timelines under OBBA.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

In California, taxes really decide the game. Cash flow in Novato or San Rafael? Almost impossible.
If you rent:

• You’ll get depreciation.
• But rents rarely cover the mortgage.
• Losses often get trapped unless you qualify as a Real Estate Professional.
• When you sell: federal capital gains, 25% depreciation recapture, plus California income tax.
• Profit is taxed as ordinary income.
• California has no special “capital gains” rate.
• That can take 35–45% of your gain.

Now, the live-in flip is where California actually helps you.

• Live there 2 years.
• Section 121 exclusion = $250k tax-free if single, $500k if married.
• California follows this rule.
• That means your gain can be completely tax-free.

Your husband being a carpenter makes this even better, you can add sweat equity without paying contractor rates.
BRRR in Marin?

• Hard to make it work.
• Tax benefits are limited unless you qualify for REPS.
  In California, the 2-year live-in flip usually beats both long-term rentals and quick flips. You keep more money and avoid the state’s heavy tax hit.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

This probably will not work as a straight 1031 exchange the way you have it now.

The IRS does not allow using 1031 funds to buy out a partner’s share of a property you already co-own because that is treated as purchasing a partnership interest, not exchanging one property for another. Partnership interests are excluded from 1031 exchanges.

Things to keep in mind:

If the rental is held in a partnership or LLC, buying your sibling's half is buying into the partnership, not the real estate, so 1031 will not apply.

If you own it as tenants in common with separate deeds, it has a better chance but is still a gray area because it is the same property.

The $150,000 of repairs does not count toward the exchange unless done through a special improvement exchange structure before you take full title.

A qualified intermediary must hold the sale proceeds, and you cannot take possession of the funds.

Unless you restructure so that you are clearly exchanging Property A for a truly separate property or a properly established tenants in common interest, the IRS may deny the exchange. It is best to plan with a tax professional before selling.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

You can usually take a 401(k) loan for up to $50,000 or 50% of your vested balance, whichever is less, and use it for almost anything, even an investment property, if your plan allows it. The IRS does not limit what you can do with the money, but your employer’s plan might.

Repayment is usually five years through payroll deductions, and it is not taxable if you stay on track. The big watch out is if you leave your job or miss payments, because then it turns into a withdrawal with taxes and possibly a 10% penalty. Also remember you are paying it back with after-tax dollars and losing whatever returns you might have gotten if it stayed invested.

• Check your plan rules and get written confirmation before doing anything

• Be aware that job loss or default can get expensive fast

If your plan gives the green light, you can move the money into your LLC and have the LLC buy the property. Just document the transfer either as a capital contribution or a loan to the LLC, and make sure the property is titled in the LLC's name.

Keep business and personal money completely separate so your liability protection holds up. And even though the LLC owns the property, you are still personally responsible for the 401(k) loan, so run the numbers to make sure the returns justify the risk.

• Keep personal and LLC finances separate at all times

• Make sure the deal's ROI beats the cost and risk of borrowing from retirement

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

If you hold a property for less than one year before selling it on an installment basis, all gain is taxed as short-term capital gain, meaning it’s taxed at ordinary income tax rates (up to 37% federal, plus possibly 3.8% Net Investment Income Tax). Receiving the payments over several years does not “convert” the gain into long-term, the IRS determines the character of the gain based on your holding period before the sale, not how long you receive the money. Also, if the property is a flip (held primarily for sale to customers in the ordinary course of business), there is no capital gains treatment at all profit is taxed as ordinary business income, and the installment sale method generally does not apply unless very specific exceptions are met.

Remember:

- Less than 1-year holding = short-term capital gain (ordinary income rates).

- Payments over multiple years do not change the gain’s character.

- Installment sale splits each payment into:

- Interest (ordinary income)

- Return of basis (non-taxable)

- Gain portion (short-term in this case)

- Depreciation recapture is recognized fully in the year of sale and taxed at ordinary rates.

- Flip properties = no capital gains treatment, profits taxed as ordinary business income.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

You’re in a strong position, a high-earning surgeon with substantial real estate equity, no need for immediate cash flow, and the ability to buy strategically while the market softens. Your goal is to keep building equity while using depreciation to reduce taxes, without becoming a hands-on landlord.

Why STRs Win

Short-term rentals (cabins, acreage, unique stays) can offset W-2 income without REPS if you materially participate. A cost segregation study can front-load depreciation for large year-one deductions, something harder to do with lower-priced monthly rentals.

Monthly Rentals Option

Housing for traveling medical staff in places like Pueblo is steady and simpler, but depreciation is smaller and tax benefits are limited unless you hit REPS. Still requires oversight unless fully managed.

Practical Buybox

Target $600k–$1.2M+ STR or hybrid STR/MTR properties within a few hours of you. Use professional management, run a cost seg in year one, and keep the farm as a low-maintenance income anchor. Use conservative financing while the market softens.

If you want, I can put together a side-by-side tax impact of a $1M STR vs. $1M multifamily so you can see the numbers clearly.

If you ever step back from actively running your practice and it becomes passive income, your real estate can still make a big impact — turning passive income into passive tax savings, even without REPS.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

If two brothers inherit 50% each of two properties and decide to swap their halves so each owns one property outright, the IRS will look at the fair market value of what’s being exchanged. If one property is worth more and no money changes hands to balance it out, the brother giving up the more valuable share is making a gift for tax purposes. That means he’ll need to file Form 709 (Gift Tax Return), although in most cases no gift tax will be owed — anything above the $18,000 annual exclusion (2025) simply reduces his lifetime gift/estate tax exemption.

Key points:

IRS rules focus on value, not just ownership percentage.

If you give more than you get, the excess is treated as a gift.

Filing Form 709 is required if the difference exceeds $18,000.

No tax is due in most cases — it just uses up part of the lifetime exemption.

Appraisals are important to document the true value difference.

To avoid gift reporting, the brother receiving the more valuable property can pay cash or transfer something else of equal value.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

@Jordan Elledge Yes, you can still do a cost segregation study in the year after you purchase a property.

Since you purchased your 2bd/1ba cabin in June 2024 and already filed your 2024 tax return, you're still in a strong position to take advantage of accelerated depreciation, even though you missed some of it initially.

- No need to amend your 2024 return
The IRS allows you to "catch up" on missed depreciation through a Form 3115 (Application for Change in Accounting Method). This lets you take a Section 481(a) adjustment on your 2025 return, applying all of the accelerated depreciation you missed in 2024, without having to amend 2024.

- Clarifying 100% Bonus Depreciation
The One Big Beautiful Bill (OB3), passed in July 2025, restored 100% bonus depreciation, but only for property placed in service on or after January 1, 2025.

Since your cabin and improvements were placed in service in 2024, your bonus depreciation percentage is based on the 2024 phase-out rate, which was 60% under prior law.

So:
Assets placed in service in 2024 (like your furnace and appliances) qualify for 60% bonus depreciation
Any new qualifying improvements you place in service in 2025 may qualify for 100% bonus depreciation

What This Means for You
- You don’t need to amend 2024
- You can still run a cost seg in 2025 and capture depreciation missed in 2024 using Form 3115
- For 2024 assets, expect 60% bonus depreciation, with the remainder depreciated over their class life
- New 2025 improvements may qualify for the 100% bonus
- Be sure to work with a CPA experienced in STR rules, Form 3115, and the depreciation changes under OB3

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

@Marcus PenderYou're in a strong position to turn your short-term rental (STR) into a profitable, tax-efficient investment. Here's how to structure it to maximize income, minimize taxes, and build momentum toward your next property.

1. Set It Up Like a Business
Even if it’s one property, treat it like a real business from Day 1:

Use a separate bank account
Track every dollar spent on cleaning, supplies, maintenance, and furnishings
Document your and your wife’s work hours, this supports tax treatment and helps determine when to outsource
An LLC is optional at this stage but worth considering as you scale

2. Tax Strategy: Use the STR Loophole
If your average guest stay is 7 days or less and you materially participate (spending 100+ hours and more than anyone else), the IRS treats your rental income as active, not passive. This means:

You can use depreciation and expenses to offset your W-2 income
You don’t need to qualify for full Real Estate Professional Status (REPS)
Start depreciating the building and furnishings now. Bonus depreciation still applies to most personal property items inside the rental

3. Paying Yourself or Your Wife
There’s really no tax benefit at this scale to paying yourself or your spouse.

You can’t pay yourselves W-2 wages from rental income reported on Schedule E
Technically, you could pay one of you as a contractor (for services like cleaning), but that income would be subject to self-employment tax, which often offsets the benefit
In most cases, it's far more efficient to deduct the cost of cleaning supplies, mileage, and other STR-related expenses instead of creating taxable income
Focus on maximizing deductions and logging work hours to support material participation, not payroll setups

4. Maximize Net Income
Use dynamic pricing tools like PriceLabs or Wheelhouse. Manage guest experience closely to drive 5-star reviews and allow for stronger nightly rates. You’re saving significantly by self-managing and cleaning early on, use that cash flow to build reserves for scaling.

5. Use STR Income to Scale
You can’t use STR income like a 1031 exchange, but you can absolutely use it to:

Qualify for your next mortgage
Save for your next down payment
Build your operator track record

Lenders will count STR income if it's documented on your tax return (after 12 months). The more clean, recurring income you show, the more options you'll have for financing your next deal.

6. Long-Term Play
This property is your launchpad. Track everything, take every legal deduction, reinvest the profits, and when the time comes—decide whether to keep it, refinance it, or sell it and 1031 into a larger asset.
By managing it intentionally now and building the right systems, you’ll be able to scale with less effort, more income, and far better tax efficiency.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Here’s what to consider based on your situation as a first-time landlord:

Tenant Backs Out After Signing a Lease

Since your tenant signed a 13-month lease and paid a deposit, the lease is legally enforceable unless it includes a cancellation or early termination clause.

If no such clause exists, the tenant may still be liable for rent until you secure a new tenant.
The agency can generally retain the deposit to cover unpaid rent or costs related to re-listing.
Any resulting legal fees or rent loss may be deductible on your Schedule E when you file taxes, as part of rental-related expenses.

Appealing Your Property Tax Assessment

If your property taxes increased significantly, you can file an appeal with your local assessor.

A successful appeal, supported by comparable property sales or valuation errors—can reduce your property tax bill, improving cash flow.

While insurance premiums are not directly tied to tax assessments, a lower assessed value may affect premiums if your policy is based on replacement cost or uses assessed value as part of the underwriting model.

Should You Put the Property in an LLC?

Placing your rental property into an LLC can offer benefits, but it's not automatically necessary. Here's a breakdown:

Pros:

Liability protection – separates your personal assets from property-related legal claims.
Helps formalize your real estate operation, especially if you scale or bring in partners.

Cons:

No tax benefit by default – the IRS disregards single-member LLCs for tax purposes, so income still flows to your Schedule E.
The idea that rental income should be run through an S Corporation for tax savings is incorrect for standard rental activity. S Corps are only appropriate in limited cases involving active business income, not passive rental income.
Can complicate refinancing if the mortgage is in your personal name.
Requires annual filings and may incur state fees.

Enforce the lease if needed or find a replacement tenant; the deposit gives you some protection.

Appeal your property taxes if the valuation seems high, you may save more than you expect.
Use an LLC primarily for legal protection, not tax savings, and avoid S Corp elections for typical rental properties unless you're operating an active real estate business (like flips or development).

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.