All Forum Posts by: Bob Norton

@Chris Henry If you do not want to build a rental portfolio, then I would recommend checking with your CPA to see what other expenses that you currently have that you can include as rental expenses (ie. make sure you're getting all the deductions your entitled to.) I generally do not recommend spending money just to save taxes, because that's a negative ROI. However, a cost segregation study may be worth the expense as @Taylor L. mentions.  Just make sure you have your CPA analyze that scenario for you because not every taxpayer gets to fully utilize the rental loss in the year the cost seg is done.

@Kurt Kleespies @Daniel Anshus Check with the county tax office.  Typically in a foreclosure the liens, including taxes, are paid off in order.  Since property tax liens are typically first in line, they would have been paid off by the sheriff after you purchased the property.

@Christopher Davis A rental loss is when you rental expenses, plus depreciation, exceeds your rental income.  This typically occurs after first placing a rental in service if you have mortgage on it, since you also get to deduct the interest paid.  It sounds as though this won't be the case for you, since the property is free and clear.  

@Kris Canaday You can wrap a mortgage with a bond for deed in Louisiana.  Contact a title company to discuss the strategy, or Regan Law Firm.

@Kelly Moniz You will need to live there for 2 years to get the gain exclusion.  You will still pay income tax on depreciation recapture for your rental.

@Christopher Davis Yes, you should file a tax return in the other state. If you have a rental loss for that rental, then you will not owe any taxes in that state.  However, as @Ashish Acharya mentioned, if you have net rental income, you will pay taxes on that income in the other state and generally will get a credit toward your resident state income taxes for those taxes paid to the other state.

You get to deduct related expenses from your rental income, such as insurance, mortgage interest, property taxes, etc.  If you have a rental loss, then you may be able to deduct that loss (up to a $25k loss) from your other income if your income is less than $150k and if you actively participate in managing your rental.  Rental income is reported on Schedule E of your personal tax return.

You get to depreciate the house, but not the land, and deduct this from your rental income on Schedule E, along with your other rental expenses.  You generally cannot deduct depreciation on your personal residence, unless you can claim a home office deduction.

I hope this helps.

@Chris Turek Your idea could work.  I recommend that you meet with a CPA to analyze the numbers to give you an analysis of the two scenarios.  Will you be able to complete the purchase of a new building for the cost seg by the end of this year?  Also, why not complete the 1031 and do a cost seg on your replacement property?

@Jennifer Konikoff Normally, the property taxes are paid off at closing from the proceeds due to the seller.  Most likely, the county sold the tax lien to an investor.  You should be able to contact the county or city to determine the status on the tax lien and if they have not, then you may have a small chance to negotiate the tax debt.  However, you should have an agreement to purchase with the seller first, before spending any significant time trying to negotiate the seller's debt.

@Joshua Sokolow Whether or not you roll your profits into the next project, you will pay income taxes on the profit from the flip.  You cannot do a 1031 exchange because it is a flip.

I recommend that you discuss this with a CPA familiar with real estate to see if there are ways to structure the deal to minimize your tax.

@Tone Church I prefer to handle the taxes and insurance myself, instead of escrowing them.  However, by escrowing them, you don't have to track when they are due nor keep extra reserves for them.  Your tenant pays it for you any way.