All Forum Posts by: Ashish Acharya

@Jackie Smith, 

Welcome to BiggerPockets! You’re asking all the right questions. As you probably know, because you have your long-term rental, real estate is one of the best investments because you can generate income, take depreciation, and potentially offset some of your W2 taxes, especially if you’re actively managing rentals. Since you have a W2 income. You don't qualify as REPS, but if your MAGI is less than 150k, you are probably seeing some tax benefits of offsetting your W2 income.

@Scott Kramer

You’ve put a lot of thought into this strategy, and it actually makes sense from a tax perspective, but there are a few things to keep in mind.

Even with only $3,000 in self-employment income, you can set up a Solo 401(k). Your contribution will be small because it’s limited by your net earnings after self-employment tax, but it’s enough to get the plan going and position yourself for future growth.

Rolling over your traditional IRA into the Solo 401(k) is generally fine, as long as the plan allows it. And doing a Roth conversion inside the Solo 401(k) works too—you'll pay ordinary income taxes on the conversion, but then your investments in the Roth subaccount (like a real estate LP) can grow tax-free. The IRS doesn't apply UBIT to Solo 401(k) accounts, including Roth subaccounts, so that part of your plan checks out.

As for the condo, you don't necessarily need an LLC just to make this work. The key is to avoid any prohibited transactions, like using the property personally or benefiting from it in a way the Solo 401(k) rules don't allow. An LLC can help create a clean separation of interests, but it's not strictly required.

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

@Bob V.

You’re on the right track, thinking about bonus depreciation. It can be a big first-year deduction, but a few things to keep in mind.

First, you need to separate the land from the building since land isn’t depreciable. After that, a cost segregation study will tell you exactly which parts of the building qualify as “20 years or less” property. For a property like yours, it’s pretty common to see around 15–30% of the building value eligible, so that could be roughly $45K–$90K in the first year.

Just remember: it’s mostly a timing strategy, so you’re pulling deductions forward, meaning less left in future years. How much you can actually use also depends on passive activity rules. And, of course, don’t let the tax benefit be the reason you buy a property—the deal itself still needs to make sense.

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

@Tony Thomas,

From a tax perspective, here are a few things to keep in mind when using a HELOC on your quad for a new property:

@Dominic Emory,

That's really cool that your fiancée's mom can pass down these rentals to you guys. That's the beauty of real estate and passing on generational wealth. However, when doing this, it is also important to consider all the legal and tax matters, and you're right... There are several tax and planning considerations to think through.

From a tax standpoint, a few things stand out:

1. Capital gains exposure: When your fiancée’s mom gifts the property, it’s considered a gift at her cost basis. That means if your fiancée later sells the property, she could inherit her mom’s original cost basis and potentially face significant capital gains taxes. This is especially relevant if the property has appreciated substantially.
2. Rental income: Even if your fiancée’s mom continues to receive the rent, technically the income flows to the owner of the property (your fiancée). You’d need a formal arrangement—like a lease or management agreement—so the IRS recognizes that the cash is effectively being passed back. Without proper documentation, it could raise questions about who is reporting the income.
3. Gift and estate tax: Large gifts can trigger gift tax reporting requirements (Form 709), even if no tax is ultimately owed. Coordinating with an estate planner is critical to ensure the transfer doesn’t inadvertently create a taxable event or complicate Medicaid planning.
4. Refinancing / BRRRR strategy: Using the gifted property to refinance and fund another property can work, but you need to make sure lenders are comfortable with the structure. Some lenders treat gifted properties differently, and you'll want to avoid violating any lending rules. Also, in high-cost New England markets, BRRRR strategies can be tricky because acquisition and rehab costs may outweigh the cash-out potential.
5. Separation of ownership and income: It’s possible to structure a family deal where ownership and income are separated, but it has to be formalized carefully. Lease agreements, management contracts, and proper bookkeeping are essential to avoid tax pitfalls and ensure compliance with gift and income rules.

Bottom line: this is definitely doable, but there are several moving parts that could have unintended tax consequences if not structured carefully. An estate planner and CPA familiar with both real estate transactions and Medicaid planning should review the plan before any action is taken.

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

@Geoff Pope,

If your goal is long-term portfolio growth, keeping the Glendale home as a rental won’t add much since your payment almost matches local rents. You also don’t really need to worry about a 1031 here, since there isn’t a gain to roll over. What you might consider instead is whether turning it into a short-term rental could improve the cash flow. Acquiring new property is always expensive, so if a strategy pivot can make this one profitable, it’s worth exploring. If that still doesn’t work, selling and using the equity to invest in a stronger market could be the better move.

 @Theodor Chung For REP purposes, drive time can count toward your hours if driving from home to your “main office/principal place of business, but only if it’s directly related to your real estate activities.

For example:

• Driving to a rental property for management, repairs, showings, or inspections does count.

It’s important to log the time and purpose of each trip so you have records if the IRS ever questions your REP status.

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

@Russ Chambers You’ve already gotten some great outlines here, so I’ll just add a little more. Since you’re carrying part of the loan, this is basically an installment sale, which means you can recognize the gain over time as you get paid instead of all at once and that can really help smooth out your tax hit.

With a 1031 Exchange, there is no need for an installment sale for tax reasons, as you are deferring the gain anyway.

In the installment sale, just remember the interest you receive is taxable, and any cash you take that doesn’t roll into a 1031 is considered “boot” and could be taxable too.

One creative angle some investors use is to pair an installment sale with bonus depreciation or a cost segregation study on the new property if you have extra basis for depreciation (assuming you already did cost seg on the old property).

Even if part of the gain from the old property gets taxed with or without an installment sale, you get fresh deductions on the replacement property to offset some of it. So instead of just worrying about your tax bill from the sale, think about matching your gain with new deductions — that’s where the real planning wins happen.

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

@Aaron Phifer Congrats on taking the first step toward real estate investing! Since you’re looking at multifamily units and potentially new construction, there are a few tax considerations to keep in mind as you plan your strategy.

• Multifamily rentals: Owning 2–4 units can be a great way to start. Investors seem to find this route a lot easier than having a long list of Single-Family rentals. You’ll want to track rental income carefully and make sure to capture all eligible deductions—mortgage interest, property taxes, insurance, repairs, and depreciation. Depreciation, in particular, can significantly reduce taxable income over time.
• New construction on land: Buying land and building a property has different implications. Construction costs can often be capitalized and depreciated once the property is completed. Don't expect to get deduction right away. Be aware that the timing of expenses and how they’re treated for tax purposes can impact your cash flow. The upside is that you get to make it customized to how you want.
• House hacking: Since you plan to live in one unit, it's important to separate personal use from rental use for tax purposes. Only the portion of the property used as a rental is eligible for deductions like depreciation. If you are doing STR, the tax savings from cost seg can be significant.
• Market timing vs. tax planning: While market conditions in Vegas fluctuate, focusing on strategies that maximize your tax efficiency and cash flow can help you manage risk. A solid CPA can help you model different scenarios to see which investment structure works best for you.

Getting started with a team, including a CPA, lender, and real estate agent, can make navigating both the market and the tax side much smoother, especially as a first-time buyer.

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

Hi @Karreta Thomas! It’s great to connect with someone else in Florida! Welcome to the world of real estate investing. Starting with wholesaling and planning to move into fix-and-flips and short-term rentals later is a great way to get hands-on experience while learning the ropes.

From a tax perspective, each strategy has its own considerations. Wholesaling is typically treated as ordinary income, so it’s taxed differently from rental income. Fix-and-flips are generally considered ordinary as well, which can have higher tax rates with self employment income.

Short-term rentals may allow you to take advantage of depreciation to offset your other RE income. That’s why it’s important to think about your tax plan early, make sure your strategy aligns with your current income, and keep clean, organized books from day one.

It is important to have a solid team, including a trusted lender, a good CPA, and a reliable real estate agent can make all the difference when you’re starting out. They shouldn’t just handle the transactions for you, they should also help guide and educate you through the process every step of the way.

One of the reasons I love real estate is how tight-knit and supportive the community is. Helping others as you learn is one of the best ways to grow as an investor, and you never know what connections it might lead to. I’m glad to see you plan on giving back, too. It really makes the community stronger.