All Forum Posts by: Meagan Barkley

Due to his income, investing in rental properites will not help currently tax wise. Rental losses are limited for high income earners that are not real estate professionals. The losses can be taken when the property is sold eventually, but if you have a tax loss you most likely will have an actual loss. No sense in losing money on purpose to save taxes.

https://www.mileiq.com/blog/limits-on-deducting-rental-property-losses/

The gain will still qualify for exclusion, but any gain over the exclusion amount will still be taxed. You will also have interest income to report. https://www.irs.gov/publications/p523/ar02.html

Search "installment sale."

No problem. I'm usually not the best at explaining the lax law, but I usually know what to search to find a good article. :)

http://www.nolo.com/legal-encyclopedia/taxes-when-you-convert-your-rental-property-your-personal-residence.html

Depreciation recapture is taxed at a maximum of 25%. So if you are in a lower bracket, it will be taxed at that rate. Keep in mind, the gain will be included in your income to determine your tax bracket, so you may be pushed into a higher bracket.

I'm not sure I understand the second question. If you do a 1031 and do not "trade up," gain will be recognized to the extent you did not reinvest the funds. The gain is first attributable to depreciation recapture, then is considered capital gain if it exceeds the depreciation recapture.

http://www.1031corp.com/exchanging-thoughts-blog/b...

There is a calculator at the bottom of this page. Hopefully thus helps.

We did a cash put refi after 6 months using the appraised value and the rate was just .125% higher than a limited cash out refi.

We are in Arkansas and had to install gutters to stop a foundation crack from getting worse. They were $1,175 installed for a 1,639 sq. foot house.

We put the account info on the lease, get it signed by all parties, we then email a signed copy to the tenant with the bank info blocked off with an Adobe text box that says something like "hidden for security," and then give them a paper copy delivered in person with the account info on it. 

We are starting to question this though. I recently read a post about a tenant that used a prior landlord's bank info to pay rent for several months at a new property before the old landlord noticed, so the new landlord lost several months of income when it was finally reported as fraudulent.

@Tim Porsche No problem. Keep in mind that under 1% of returns are being audited these days due to IRS budget cuts. If you feel you qualify and you have everything else in order tax wise, it might be worth the risk. The IRS can only go back 3 years typically (unless you have understated income/overstated expenses more than 25%). So they may disallow that $750 for 3 years, make you pay the tax and interest, and tell you not to take the deduction any more. 

I know plenty of people that take feel it's worth it in the end, but others that just don't want to deal with an audit if it were to happen.

There is no minimum hour requirement for the home office deduction. The main catch that trips people is that the space should be used EXCLUSIVELY for business. I have seen a court case where a taxpayer was denied the deduction because a bookcase filled with pleasure reading books was in the room.

Another glitch with rental property is whether it qualifies as a "business" since it is per se passive. I have seen courts side on both sides. There was a case where a gentleman with a W-2 job had a couple of rentals and he used his home office to collect rents and do bookkeeping and the court allowed it. I have also seen quite a bit of literature that if an activity is entered into for the production of income, it is considered a business for purposes of the home office, so one rental property should qualify.

The home office deduction is an easy audit flag since most people use the room for something else besides an office. Just depends on your risk tolerance and what you can prove to an auditor.

Also, there is a newer safe harbor for the home office deduction so you don't have to keep track of individual expenses. It is $5 per sq. foot.