All Forum Posts by: Natalie Kolodij
Natalie Kolodij has started 63 posts and replied 3635 times.
Post: Cost Segregation - What type of Property is best?
- Tax Strategist| National Tax Educator| Accepting New Clients
- Posts 3,749
- Votes 4,499
Commercial property tends to have a higher ratio of bonus-qualifying assets than SFH.
A gas station is what provides the very highest ratio typically.
There's a charts that various companies put out related to this- but most don't include SFH.
@Yonah Weiss may have some insight
Post: Is Land Value determined at purchase even if rented years later?
- Tax Strategist| National Tax Educator| Accepting New Clients
- Posts 3,749
- Votes 4,499
You are going to use:
Purchase price + closing costs when purchased for your adjusted basis.
THEN
You will use the counties ratio from the year it was put into service....to determine it's building vs. land value.
The specific amounts don't matter, it's the ratio.
So if they say land is worth $327,500 in 2022 when you started renting it ....and they say building value is $500,000
You take $327,500/ $827,500 * Your cost basis of what you actually paid= your land value
And $500,000/$827,500* Your cost basis of what you actually paid= your building value
Post: Bonus depreciation help
- Tax Strategist| National Tax Educator| Accepting New Clients
- Posts 3,749
- Votes 4,499
Also worth noting bonus is based on the year the asset went into service, not when a cost segregation is done.
This means if you put rentals in service in 2018-2022 you can potentially till qualify for 100%
Post: Tax Prep Services Needed
- Tax Strategist| National Tax Educator| Accepting New Clients
- Posts 3,749
- Votes 4,499
Well.
A good tax professional will let you know that an entity and a cost seg may not even benefit you in any way.
If you don't have the money don't spend it on a tax professinoal.Then the buden shifts onto you to spend your time instead learning to try to do it correctly yourself.
Post: Mix Use Duplex as STR and LTR for Tax Filing
- Tax Strategist| National Tax Educator| Accepting New Clients
- Posts 3,749
- Votes 4,499
I actually ran into this with a client last year.
I paid for a consultation with a colleague who was the IRS technical advisor on code 469 for 25 years to offer some feedback and clarity because it is so unique.
The long and short of it is this:
There are two things your tax professional is going to need to consider and could provide nuance with set up. Deprecaition for a rental vs. non rental activity is based on specific rules. That is determined at the BUILDING level. There's an 80% of income rule, so even though you have both short and long term activites- the entire building may be depreciated at either 39 or 27.5 years, depending on analysis.
Second- it is possible to have two activities within the same building. And they could be treated accordingly. You could utilize the STR loophole just connected to that specific unit. Your records and tracking will need to be impecable.
This is allowable because unlike the depreciation test, the rules here tie to the activity, with is not defined as an entire building. Think of other mixed use properties: storefront on level 1 with apartments above.
Like Michael said above it defintiely COULD be seen as a red flag potentialy, just because it may look odd. But is defendable. So work with a good tax professional and see how plausable and beneficial it actually would be.
Post: Qualifying as real estate professional (meeting IRS definition)
- Tax Strategist| National Tax Educator| Accepting New Clients
- Posts 3,749
- Votes 4,499
Quote from @Sudhir N.:
Reviving the thread for some follow up. I am NOT on W2 income and spend full time investing and monitoring properties. What activities would count towards qualifying as a real estate professional? (I understand that searching for properties to invest in does not count) Presently I have units managed by a property management company. Yet I contribute in following ways. Do these tasks apply? I read on a different forum that the presence of a property manager negates any work I might do. But I can't find any IRS guidance on that.
-- Market analysis to determine rents (when units churn and also renewals), security deposit and last month rent requirements
-- Work with leasing agent/s to suggest rent changes, incentives/ promotions to enable units to be competitive (if there is too much supply)
-- Review each and every maintenance work order and shop around for contractors / service providers if necessary. Also suggest alternate solutions, if applicable. This turns out to be majority of the work that I do
-- Pay utility bills and mortgage monthly
-- Property tax payment (if not escrowed), city trash collection fees (once or twice a year)
-- Coordinate annual maintenance of sprinkler system certifications and fire alarm monitoring contracts
-- Review owner statements from prop mgmt. company every month to identify inflated or incorrect charges. Also for correctness
-- Property related tax preparation/ filing
-- Plan and execute capital improvements
Administrative time is only allowed to be included if you are also involved in the day-to-day management activities.
Post: Russell Brazil's 15,000th Post
- Tax Strategist| National Tax Educator| Accepting New Clients
- Posts 3,749
- Votes 4,499
Sometimes I forget BP isn't FB and I can't add the "Those are rookie numbers!" Gif to this post.
Congrats though! That's a huge accomplishment and I'm one of the people you've personally had a huge impact on. Plus I love your dog Pumpkin. So all in all 10/10 recommend working with Russel. Follow for the REI advice, stay for the Pumpkin pics.
Post: Cost Seg Recommendations
- Tax Strategist| National Tax Educator| Accepting New Clients
- Posts 3,749
- Votes 4,499
Yonah Weiss with madison Specs
Did you talk to your tax professional to ensure you can utilize those losses before you pay to generate them?
Post: Convert Primary Home to LTR - 2 year tax benefit?
- Tax Strategist| National Tax Educator| Accepting New Clients
- Posts 3,749
- Votes 4,499
Do you plan to sell in the next 3 years?
If so you'll want to stay 3 more months. Then when you sell you'll be able to exclude up to $250k/$500k of gain tax free.
It's an all or nothing in this situation - so if you hit 24 months you're good, if you don't you get to exclude 0.
The rule is 2 of the most recent 5 years. So once you move out and convert to a rental you can rent it for up to 3 years and still sell tax-free.
If there's no chance of selling in the next 3 years then there's no beneift to hitting that 24 month mark. Once you're past the 5 yeras the exclusion is gone completely.
Post: Designating yourself as a real estate professional
- Tax Strategist| National Tax Educator| Accepting New Clients
- Posts 3,749
- Votes 4,499
Quote from @Tiffany Liu:
So I've accumulated say $150K of passive losses (over the years) in my rental properties. My non-working spouse plans to qualify for as RE Professional in upcoming year. BUT I won't be able to offset the cumulative $150K losses against my earned W2 income?
Also another question, my spouse self manage all of our rental properties (how she's able to qualify for the REP hours + having RE license for other RE related activities). Is it possible that we set up a property management LLC (or s-corp) where my spouse is paid a property management fees as earned income from the LLC that owns the properties? I can utilize dependent care savings account under my employer, and also contribute the residual PM earnings to a SEP IRA or solo 401K for my spouse. I know we will have to pay self employment tax (15%) on the PM earned income. But the offsetting PM expenses can reduce my earned income (in 35+% tax bracket). Does that work?
Also for the cumulated passive losses in the past, how else can I tap into those in lump sum way other than selling a property to crystalize capital gains?
Correct- Only any losses incurred AFTER they qualify will be available. Additionally, if they're claiming they meet the requirement by looking at time spent on ALL rental proeprties...those prior losses won't be deductible even if you sell a property. Becuase now you've llumped them all into 1 activity, and the whole business activity would need to be sold to access those prior trapped losses now.
You can set up a management company if there's a purpose, such as generating qualifying SE income to fund retirement accounts and such/
I highly recommend working with a REI tax strategist to make sure both of these are appropiately setup.