All Forum Posts by: Michael Plaks

@Joshua Kohl

The short rule is: you can deduct something that would be deductible if the property was already in operation as a rental. Which means mortgage interest, property taxes, HOA and insurance.

Costs that are one-time and are specifically related to the purchase, like an inspection, are added to the tax basis and depreciated, instead of being deducted right away. With an occasional exception.

Like @Basit Siddiqi mentioned, things are more complicated if you're going to live in one of the units.

@Kelly Waite

Two of the Atlanta CPAs who contribute to this forum are @Ashish Acharya and @Bill Hampton

Maybe, and maybe not.

Read this excellent blog post by Brandon Hall, CPA:

https://www.therealestatecpa.com/2016/10/20/avoiding-tax-traps-short-term-rentals/

The difference would be if you have other people working in your business, which is why I mentioned being a broker.

If all your income is your personal commissions, you can't say with a straight face that some of that was NOT compensation for your services. Different story if you have agents working for you.

Thank you @Basit Siddiqi.

@R Rani - we did connect the same day you contacted me, thank you.

@Robbie Pratt

I strongly advise you against the 60-day rollover "borrowing." It's perfectly legal, however also perfectly dangerous.

9 out of 10 people who take this route end up unable to replenish the borrowed money, resulting in huge cost: full tax plus 10% penalty. So, they borrow $20,000, unable to return it within 60 days, and then end up owing the IRS an extra $5k-$8k in taxes. A very expensive trap.

@Rian Ash

I do not understand your statement "the numbers only work if the interest I pay to my investors is Tax-Free for them."

However you try to structure it, when your investors receive more than what they invested - whether you call it interest or anything else - it is income to them. Income is always taxable.

The only exception is if they lend you money out of their retirement accounts, like self-directed IRAs or 401k.

@Daric Myers

If the work they do is for your personal needs, like errands - then just pay cash.

If you hire them for business tasks, and you are going to pay them less than $600 over the calendar year - pay with checks or PayPal.

If you're paying anybody more than $600 per year for business tasks, you will need to issue them a 1099-MISC. So you will need to warn them ahead of time and collect their full name, address, and SSN before they start. After you paid them, they often refuse to release this information to you.

@Stephen Thomas

Please be careful with tax advice from non-accountants.

1. Deferred compensation is the money you do not receive now. And you simply push that income into the next year, where it will be taxed anyway. Is it worth the temporary deferral of taxes? Besides, what if the company goes under meanwhile, which does happen.

2. You can no longer deduct any expenses for your W2 job. Not leased car, not equipment - nothing at all. The law has changed.

@Joe DeLuca

Let's clarify the "owner-occupied triplex." The way I interpret your phrase is that you will be living in one of the 3 units yourself, while renting out the other two.

If this is the case, than you're buying TWO properties, for tax purposes: a personal residence (1/3 of the property) and a rental property (2/3 of the property). All expenses are allocated between them.

For your personal part - you will probably stay with the standard deduction and essentially throw away 1/3 of the triplex expenses, because the new doubled-up standard deduction is likely to be greater than itemized.

For the rental part - all income and expenses are reported in a separate place of the tax return, Schedule E. That Schedule E is NOT related to the personal deductions. It is completed whether you use the standard deduction or itemized deduction on the personal side.