All Forum Posts by: Meagan Barkley

@Anthony Garcia Yes the meeting is tonight, networking at 5:30 and meeting starts at 6.  The meeting is in a hotel. If you go in through the front lobby, the meeting room is on the right side of the lobby, down a hallway past the snack bar area. The room is on the left in the hallway. There will be noise you ca follow, :) Unfortunately I can't make it tonight as I am a CPA and we are a little busy these days. :)

600 Van Asche Dr, Fayetteville, AR 72703

If you are going to do the "grunt work" on your own, I would recommend reading up on the repair regulations, especially the de minimis election.

We have a REI meeting in Fayetteville every 2nd Tuesday at the Courtyard on Van Asche Dr. Networking is at 5:30 and meetings Starr at 6.

Agree with the above, it doesn't matter how many rentals you have. if the repair was made before the property was placed into service, it is capitalized to the original basis.

Once the property is in service, you should follow the new repair regulations. You can Google that and you will find plenty. :)

I am a CPA as well.  I am not a lawyer and cannot give legal advice. 

I would not hold flip and rental properties in the same legal entity for liability reasons. If something goes bad on a flip and you get sued, your rentals could be would be open to the lawsuit.

I am not sure where this idea that if you have an S-Corp you can pay yourself wages and everything else is dividends comes from. For BOTH, the income passes through on the K-1s from the S-Corp or partnership, and will be taxed at your ordinary rate on your personal income tax return. The difference comes in with the amount that is subject to self-employment tax. All ACTIVE income from a partnership is subject to SE tax (rental income is not active and is therefore not subject to SE tax). In an S-Corp, only the REASONABLE wage paid to yourself is subject to SE tax.

Example: Say you have $70k of taxable income from flipping after $30k in wages ($100k in income before you 'pay' yourself). In both situations a total of $100k will be taxed at your marginal rate on your personal tax return (no matter how much money you withdraw from the business). For the S-Corp, employment taxes will be paid on $30k (1/2 by you and 1/2 by the S-Corp). For the partnership, $100k will be subject to SE tax, paid 100% by you on your personal return. The savings is the $70k of income you can say that wasn't wages and therefore not subject to SE tax. 

To determine the savings, a quick number to use is 15% of the amount that wouldn't be subject to SE tax. So in the example above, if you have $100k in taxable income from flipping and paid yourself $30k in wages, you would save over $10k in employment taxes. (This won't work when you pass the social security wage base - $118,500 in 2016.)

Also, keep in mind, rental income is not subject to SE tax.

I found a nifty calculator: https://www.lawinc.com/corporation/overview/tax-savings-calculator

Clear as mud!

Even if it's an LLC legally and taxed as an S Corp, the passive income issue will still be an issue. S Corps are only beneficial for active income (like flipping). If you are an LLC and elect to be taxed as an S Corp with rental real estate only, you will be penalized by paying the highest tax rate. The S Corp allows you to control SE tax, and SE tax isn't due on rental real estate. I think people are confusing legal status and tax status. Partnerships and S corps are both pass through entities for tax purposes, either one will be taxed at your personal bracket.

http://smallbusiness.chron.com/s-corporation-passive-income-restrictions-76870.html

You generally don't want to hold rentals in an S Corp. See the passive income restrictions section.

http://smallbusiness.chron.com/s-corporation-passi...

27.5 years is correct for residential rentals. Also look into "partial disposition." You will get to write off part of the cost of the original asset.

I keep my properties at cost as well. It will make your life much easier come tax time when/if you sell. You can make a separate line item for the increase in value, or if you just want to show a bank, make an entry and reverse it after you give the financials to the bank. I just keep a spreadsheet to track the equity. Much easier to change the values and I like to see my rental income without being inflated with unrealized gains on the books.