All Forum Posts by: Jason Malabute

Great question! One of the biggest attractions I’ve seen when raising capital through Self-Directed IRAs (SDIRAs) is that investors don’t need liquid cash on hand—they can put their retirement funds to work in real estate. It opens the door to investors who are interested but may not have readily available capital.

That said, it’s crucial for both sponsors and investors to understand the tax implications. For example, investing through an SDIRA can trigger UBTI (Unrelated Business Taxable Income) or UDFI (Unrelated Debt-Financed Income), which could result in tax liability even inside a tax-advantaged account.

Hi Sophie — since this was a fix-and-flip, it’s treated as inventory, not an investment property, so you don’t depreciate the renovation costs. Instead, all your rehab, holding, and financing costs from 2021 to 2024 should be added to your cost basis and deducted when the property sells. The entire profit (or loss) is taxed as ordinary income, not capital gains. If you sold at a loss after including all those expenses, there shouldn’t be a big tax bill. Sounds like your tax person may be misunderstanding how flips are taxed.

Thanks for sharing, Gregory! It’s always interesting to see how the reassessment process for seeking reduction in real estate tax works in Ohio. Funny thing is, every county seems to have different requirements, which makes it even more challenging to navigate. Appreciate the reminder

Yes, you definitely should consider working with a CPA, especially given your situation. Here’s why:

1. Wholesaling Business & Entity Selection: You just opened a wholesaling business, and I noticed you used an LLC. A CPA can help determine whether that's the best legal entity for you. Sometimes, using an LLC might result in higher self-employment taxes, and a CPA can advise on more tax-efficient structures.

2. Maximizing Deductions: Since your wife’s consulting business generated less than $10,000 in revenue, it’s essential to ensure you’re capturing all potential deductions. A CPA can help identify expenses you might have overlooked, ultimately helping you maximize your tax savings.

3. Rental Property Considerations: You own a rental property in your name, and there might be opportunities to claim passive losses to offset your active income, depending on your adjusted gross income (AGI) and whether you qualify as a real estate professional for tax purposes. A CPA can guide you through these nuances to minimize your tax liability.

Even if your revenue isn’t substantial right now, the peace of mind and potential savings from proper tax planning can far outweigh the cost of professional advice. 

Yes, Erik, you are operating a business in this situation. Renting out rooms in your primary residence, especially when you’re regularly receiving rental income and incurring significant expenses for repairs or landscaping, meets the IRS criteria for running a trade or business.

Because of this, you are required to issue 1099-NEC forms to contractors if you pay them $600 or more in a year

Credit to Michael for this insight.

H&R Block isn’t well-suited for real estate taxation, and while TurboTax is technically correct about needing Form 3115, it’s not a simple. Reach out to a CPA 

Financing is treated separately from calculating gains. When calculating capital gains on a property sale, the amount of financing or how you funded the improvements (like using a HELOC) does not impact the gain calculation. The capital gain is based on the difference between your selling price and your adjusted basis (purchase price plus improvements), regardless of how you financed the deal. In your example, the government would indeed see the $100k profit as taxable, regardless of the loan repayment.

There’s a lot of nuances to the tax law for your particular situation, and it’s really hard to give solid advice online without knowing all the details. I’d highly recommend reaching out to a CPA who specializes in real estate to do some tax planning and projections for you. That way, you can see what the best game plan is for your situation and maximize your tax savings.

There are a lot of variables to consider, including the timing of deductions, passive activity loss limitations, and how your other income sources might affect your overall tax strategy. A professional can help you navigate these complexities and give you tailored advice.

nevermind I found it

Did Dave Mayer publish a "State of the real estate market " for 2024 or 2025 like he did for 2023? If yes where can I get it? If no, where can I get the updated all of the stats to update it for 2025??