All Forum Posts by: Joshua Thompson
Joshua Thompson has started 3 posts and replied 200 times.
Post: Am I a "Business" or "Investor" for Tax Purposes?
- Accountant
- Princeton, TX
- Posts 206
- Votes 128
@Philip C. This is the second time this book has been mentioned. I'll be adding it to the collection that much sooner. Thank you!
@Michael Plaks Thank you for the feedback. I ask because I'm hoping to become a CPA after I graduate and looking for some material to reference.
Doesn't adding all these personal items make the depreciation schedule long and messy? Or is that just the nature of the beast.
Post: Fix and Flip Tax Question
- Accountant
- Princeton, TX
- Posts 206
- Votes 128
Originally posted by @Lauro Torres:
Hey guys I fixed and flipped a house and made a profit. Are there any documents I should be gathering from the closing company and filing on my tax return? Or do I just report the amount of profit?
The very minimum you'll need the HUD-1 and a CPA or EA with real estate experience that can advise you on all the additional documents you'll need. HUD-1 is a good place to start. They'll also ask you to gather everything you spent on fixing up the property.
Post: Am I a "Business" or "Investor" for Tax Purposes?
- Accountant
- Princeton, TX
- Posts 206
- Votes 128
Originally posted by @Michael Plaks:
Four very different issues are at play here. Which is why RE taxation is so confusing for y'all and so profitable for us accountants. :)
Warning: I'm taking some liberties with the terminology, for the sake of clarity.
1. Active business v. Passive renting/landlording. This issue is about which schedule to use (Sch C or Sch E) and whether the income is subject to the self-employment tax, aka Social Security and Medicare tax. The answer for a rental property in 99% of the cases is the latter: passive renting and no SE tax.
2. Trade or Business v. Investment activity. This issue is about deductibility of general business expenses and the new 20% deduction on net income. The answer for a rental property in 99% of the cases is the former: Trade or Business, meaning all deductions are available.
3. Active participation in the activity. This issue is about your ability to deduct your rental losses, including depreciation, against your "normal" income, such as W2 salary. The answer is probably yes in your case, but I would need more information.
4. Passive activity v. Non-passive activity, aka Real Estate Professional status. This issue is about your ability to immediately deduct all your rental losses, regardless of your income level. The answer requires additional information from you, but it is probably the former: Passive activity, meaning that deductions for your losses can be limited if either your losses are too high or your income is too high.
Finally, on the appliances - yes, you can depreciate or even write them off completely the current value of the appliances. The key is: current value, not their original price paid by the previous owner.
In response to the appliances, does that mean the majority of personal property can be written off at its current value? If so how can we know or where can we find what the IRS considers personal property vs real property?
Post: Acquisition Fee or Assignment Fee?
- Accountant
- Princeton, TX
- Posts 206
- Votes 128
@Bradford Hancock No problem man and welcome to BP!
Post: Expenses and deductions this year
- Accountant
- Princeton, TX
- Posts 206
- Votes 128
I'm not a CPA but just off what I've learned in my tax classes and working for a CPA I see some issues going on. I would recommend finding a CPA. I understand not wanting to get a CPA at 1 property or even 3 but at 6 do yourself a favor and spend the few hundred dollars for a good CPA that can probably save you thousands in taxes or even sleepless nights due to an audit.
I have one rental and prepared the tax return on TurboTax before deciding to go into the accounting world and working for a CPA. After having my boss (CPA) look at it, on day one he noticed I paid taxes on roughly an extra $5500 that I didn't need to.
Good luck man!
Post: Acquisition Fee or Assignment Fee?
- Accountant
- Princeton, TX
- Posts 206
- Votes 128
This sounds a lot like wholesaling. If that's the case the forums should have plenty of information on how to successfully do a deal.
Post: S Corp Training Expense
- Accountant
- Princeton, TX
- Posts 206
- Votes 128
Originally posted by @Patrick S McCarthy:
Hello Resident Tax Gurus!
I just started an S Corp and I'm the only employee. I am interested in taking a training course. Do I pay for this course directly from my S Corp account OR do I pay for it myself and expense it to the business?
Hey Patrick,
First off I'm not an attorney or CPA and would recommend against taking my word as law. Instead, let it be guide in which direction to keep looking. However, since you have a S Corp I would run the expenses out of the S Corp account and believe its wise to do so with all transactions related to the business. I believe this protects you from the whole piercing the corporate veil issue that you can find all over the site.
If someone has more information please let me know.
Post: Tax planning services needed
- Accountant
- Princeton, TX
- Posts 206
- Votes 128
Originally posted by @Kenneth Kussman:
Need real estate tax planning services in the Dallas Texas area
A good place to start is to call a few local CPA or EA in the area and interview them. It's always nice to know they invest in real estate and work with other real estate professionals. What I advise not to do is interview the first CPA or EA you find, stop there and hire them. Just like real estate don't forget to due the due diligence.
Good luck buddy!
Post: Home office without deduction
- Accountant
- Princeton, TX
- Posts 206
- Votes 128
Not 100% sure on this one and would recommend talking to a CPA that works with real estate investors. I believe if you're flipping houses that will show up on your schedule C (profit or loss from business). If this is the case the mileage should be able to be written off if tracked. Hopefully, there's a tax professional that can fill in the missing holes.
Post: Out of State Property
- Accountant
- Princeton, TX
- Posts 206
- Votes 128
It might be helpful to find a local mobile notary as you may need one. They usually range from $150-$200 in my area of CA.