All Forum Posts by: Bob Norton

@Dusty Laurin If your income comes from your rental properties, then you will not pay self-employment taxes.  Rental income is excluded from SE taxes, even for real estate professionals.  However, if you also flip or wholesale properties, then you will pay SE taxes on income from these activities, regardless of whether or not you qualify as a real estate professional.

@Obi Linton You will need to find out who should inherit the property from her and negotiate with them.  

@Wendy Vaidic Based on how you described the situation, it sounds like you are acting as a general contractor for this rehab project from the seller's perspective.  The amount that you get paid at closing would be considered a cost to him for improving the house for sale and he would get to add that cost to his basis which reduces his gain on the sale.  Resulting in the seller paying taxes on the amount of the net gain he received from the sale.  Your portion would be taxable to you, most likely as active income on which you will also pay self-employment taxes.

@Itzel Salazar You will need to confirm the inheritance laws in Texas.  You will need to research the family tree of the owners.  If there are no children or grandchildren, then the parents inherit, and if their parents have passed away, then it goes to their siblings, and then the siblings' children it their siblings have passed.  You can end up with a lot of people with a small inherited interest in the property and you'll have to track them all down and purchase their partial interest to get the property.

You might want to find out if there are tax liens on the property before doing all that work.  

Good luck!

@Prash Manohar Unfortunately, no.  Whether your file jointly, or separately, your incomes are presently too high to deduct rental losses from regular income.

@Prash Manohar The AGI limit for fully deducting rental losses is $100k and the rental loss deduction is partially deductible up to $150k.  If you file separately, then the limit is $75k.  Your rental losses will be suspended and can offset future rental income, so you don't lose the losses, you just can't use them to reduce your earned income if your AGI is above these limits.

The only way to fully deduct your rental losses is by qualifying as a real estate professional.  This is a two part test.  The first part is rather easy and its that you spend more than 750 hours working in your real estate business.  The second part is difficult for taxpayers with full-time jobs and the test is that you have to spend more than half your working hours on your real estate business during the year.  If someone works a full-time job at 2,080 hours during the year, then they would have to work an additional 2,081 hours in their real estate business to meet this test.  

@Benjamin Kanevsky Have you considered southern Mississippi?

@Kevin Mejia You get the exclusion on the entire property; however, you will have to pay taxes on the depreciation recapture.

@Lauren Hogan I fell in love with the city when I moved here for graduate school.  Years later I got into real estate investing.  New Orleans has a lot of history and most investors can qualify for historical tax credits on their renovations.  I have several clients taking advantage of these credits.  Most commercial renovations are partially funded with historic tax credits at both the Federal and state level.

@Prash Manohar Since your AGI is greater than $150k, you would not get to deduct real estate losses against your regular job income for the year.  The losses will be suspended and can be used to offset rental income in the future, or can be taken in future years when you sell the property.