All Forum Posts by: Michael Plaks

@Marston Gould

The short answer is - yes, you can. The long answer would have to go thru a lot of details, which is best left for your CPA.

You will basically partition your property, including mortgage, taxes, and utilities, into two: personal residence and rental apartment. This blog post by @Brandon Hall gives an excellent introduction into the applicable rules.

@Anthony Conway

How can I stay in shape but not watch the calories, because I like pizza and ice cream? Answer this one for me, and I will answer yours. :)

You're right. Obviously, lenders want to see high income. Less expenses = higher income = better loans. However, not deducting expenses that you're eligible for is not only causing you to overpay taxes - it is actually against the IRS rules.

The loophole that you're talking about is to replace some of the deductions with depreciation. It is OK if done correctly, and it might help you, but it depends on the lender. Some of the lenders will add depreciation back when evaluating your income, and others won't. It also depends on what you are depreciating and what is your business model. 

I doubt you can find a good answer without having an accountant go thru your options and your numbers AND also verifying with your future lender that their underwriting will make the desired adjustment for depreciation.

 That is correct, which is why you choose a tax advisor/accountant on BP, not elsewhere  ;)

@Alex M.

1) Yes, separate. Not only for tax reasons - for basic money separation. You never want to mix money when you have partners in one of the businesses but not the other. 

2) You may or may not benefit from S-corp. Depends on numbers. I would not go the S-corp route without getting customized advice. Form LLC now, but you have until 3/15 to make the S-corp election.

3) This is an attorney's question, and I'm not one. Usually attorneys recommend to create holding LLCs in the same state where they will hold properties, regardless of your residency.

@Jeremy Janszen

These days, having a local accountant is no longer critical. Many of us here on BP work remotely, serving clients nationwide. Happy 2018!

@Chris K. and @Kyle J.

I also believe there is no risk to prepay EITHER way. If we eventually find out it is deductible in 2017 - great. If it turns out, after the dust settles, that it cannot be deducted in 2017 - then we deduct it in 2018.

In other words, prepaying at least gives us a shot. Waiting and not prepaying robs us of that shot, for sure.

@Leland Dunn

You're correct that nobody knows for sure at this point. I believe that you qualify, and no LLC is needed, but it's too early to say it with confidence. See more discussion on this thread.

Don't think so. The assessment date in IL is Jan 1, 2018 for the prior year - which is 2017. Until next week, 2017 IL taxes are NOT assessed - and therefore cannot be prepaid.

That is how I read. I can see how it could be read differently, but I believe my reading is correct.

@Patrice Penda

You answer is correct, but it's not what @Joe Moore asked. :)

He asked if he had to pay before Jan 1 to count as 2017 payment - and the answer is absolutely yes.

(You answer was whether he is allowed to prepay 2018 taxes - a different issue)

@Chris Pomerleau

Not sure why do you think you need an attorney. Tax attorneys are needed for advanced tax controversies (i.e. suing the IRS). Business attorneys are needed for asset protection and setting up business entities like LLCs. 

For business and tax planning, you normally use accountants: CPAs or EAs.