All Forum Posts by: Justin Freeman

Investment Info:

Large multi-family (5+ units) buy & hold investment.

22 Unit efficiency complex

@Ed Emmons Thanks for the mention Ed.

Thanks for the plug Ryan! 

Bryan, I'd be happy to chat anytime. I actually have a five unit in Rockland. Love chatting about real estate and taxes. 

@Jason Waldo this works to the extent you make less than $150,000 or you are considered a real estate professional.

If you work as a W-2 employee full time and make over 150k any losses from your real estate investments can only be offset against other "passive" income and you can't offset your depreciation against your W-2 income.

Even making less than $150k, you can only offset losses on your real estate against your earned income by $25k.

It's a great strategy but as income increases the strategy phases out. That's not to say real estate is bad. I get 27.5 years of cash free depreciation deductions so I potentially get tax free cash flow for a period of time, but offsetting against other income is going to be limited.

Thanks @Nathaniel Seekins!

Blaine, happy to chat anytime.

Thanks!

@Paul Passafiume

You're spot on Paul, and congratulations for getting yourself educated on the law and the potential for imitations for "specified service trades or businesses."

At $300k income, MFJ, you dont have to concern yourself with wage limitations, or the limitations on the SSTB's.

To give your current accountant a little leeway, I would say in March/April of last year not a lot was known about who would or wouldnt get the deduction so the conservative planning option was not to assume a full 20% deduction. This is the same time frame lawyers were trying to split their businesses into 3 different companies to try and get a portion of the deduction (didn't end up working). Even some of the final regs didn't get released until last week, so it's been tough to plan for.

@Paul Passafiume

Hi Paul, no one is excluded per se, but can be limited by profession and potentially by other limiting factors, i.e. wages, unadjusted cost basis, etc. So the simple answer is yes, your business as a doctor does qualify before other limitations.

The fact that you operate as an IC, you are probably operating a trade or business that qualifies potentially for the QBI deduction again you need to look at limiting factors. The net income of your business, less certain deductions will be the QBI that is used for the 20% calculation. Also, the calculation itself is going to be a combination of all trades or businesses, including real estate combined.

If you're looking to be more informed on the QBI deduction and how it affects real estate, look to the recent guidance that was issued last week about who can take the deduction for those involved in real estate.

Houston, we're gonna need a bigger venue. 

@Llewelyn A. I agree I don't like it as a structure specifically for that reason. I Believe we've turned rental payments not subject to SE tax into earned income via the management company subject to SE tax.

@Chris McHaney I'm kind of going through the same thing here with a client I work with. There is a separate operating entity that collects rents, pays expenses etc. The property and any associated debt is in a completely different entity or owned by an individual. In reality, what is occurring is there is essentially a lease agreement between the property owner and the operating entity. If the arrangement is going to continue I would urge a lease agreement to be drawn up. In addition, any loan payments or payments made on behalf of the property ownership entity are essentially disguised rental payments to the ownership entity from the operating entity. What you have then is a property management company that reports its income and expenses reported on a 1065 and an ownership entity that should probably be reporting rental income, depreciation expense and potentially interest expense if there is a loan.