All Forum Posts by: Natalie Kolodij

There shouldn't be tax implications to moving a rental into/out of a SMLLC. 

Historically though- most people don't maintain books clean enough for an LLC to be the most useful for asset protection

I would recommend reaching out to @Steven Hamilton II if you're looking to work with someone very knowledgable in those areas.

Honestly house hacking is one of the most common starting methods of real estaet but one of the trickiest for tax purposes. 

I'd recommend retaining a professional to make sure it's set up correctly and you're maximizing allowable deducitons 

Amanda Han is based in California and she wrote the BP book on taxes. I'd reach out to her. 

Standard vs. Itemized deductions relate to schedule A, these are for you personally. You get this with or without a rental. 

Rentals go on Schedule E. All expenses and income goes here. 

If the net of those items on Schedule E create a Loss - you can potentially use that loss to offset your w2 income. 

If your Adjusted Gross income is under $100k you can deduct up to $25k of losses annually. 

If youre AGI is over $100k-$150k you can deduction a more limited amount of those losses

If your AGI is above $150k you can not deduct any losses, they CAN offset other passive income sources if you have them, or they carry to the next year and will do so until you are in a position to use them. 

Quote from @Account Closed:

Originally posted by @Natalie Kolodij:

Quote from @Account Closed:

Originally posted by @Natalie Kolodij:

Originally posted by @Dawn Heisler:

Best thing I ever did! I am an LLC with a Sub S Corp. I pay myself and my assistant through the same company who created the Smart Square for charging credit cards on your phone. They do everything including payroll taxes and our W2's at the end of the year. I pay myself a set amount. In my case $2000 every 2 weeks. $1000 goes into my bank account, $1,000 goes to pay taxes. I draw from the rest of my commission as needed. With my rentals and expenses for depreciation I now get a refund every year and save a ton in self-employment taxes.

 Your agent income is taxed fully differently than rental income. Rentals already don't pay that payroll tax it's allowing you to save, and keeping appreciating assets in an S corp is a landmind of liability for tax. 

I'm not sure if I understand you.

Are you saying that an S Corp and an LLC filing as an S Corp are the same thing for Tax & Asset purposes

Or Are you saying that an S Corp and an LLC filing as an S Corp are entirely different for Tax & Asset purposes?

 I wans't saying either of those things. But those 2 things you listed file the sale way for tax purposes. 

I was saying that there are different types of taxable income in real estate 

Agent income = Subject to SE tax

Rental income= passive, Not subject to SE tax

People like S corps for tax purposes because they allow you to save on SE tax. So they don't save you any type of tax on rental income. 

But having an asset in an S corp that is appreciating is a bad taxable sitaution- because if you ever need to transfer it out (to refinance, or a 1031 ect) it's deemed a taxable sale at current Fair market value. Even fi you're just transferring it to yourself. 

 I did find this: "If the LLC has property that it then distributes to members, then whether the transfer is taxable depends on whether the LLC is taxed as a partnership or a S corporation. Distributions from a partnership are not taxable events. Distributions of property by a sub S are treated as sales of that property and the gain is taxable to the owner. The rules favor taxation as a partnership but probably again will not be in and of themselves compelling enough to want to be taxed as a partnership."

But it occured to me that distributions are a taxable event for sole proprietors and single member LLCs anyway, so there appears to be no difference unless your LLC is treated as a partnership.

Distributions from a sole prop and SMLLC are not a taxable event. 

Distributions from a partnership are not a taxable event. 

You're taxed on your earnings- not what you take out. 

And if you had a house in a SMLLC or Partnership...and transferred it to your name....no taxable event. 

The only time transferring an asset to yourself/between yourself and your entity creates a taxable event is with an S corp. That's why we don't recommend keeping assets in S corps. 

My only weird tidbit to add. Is Cape Coral has these weird protected owls that nest in the ground- if you're buying remotely make sure your lot isn't housing any before you close or it won't be usable. 

Quote from @Account Closed:

Originally posted by @Natalie Kolodij:

Originally posted by @Dawn Heisler:

Best thing I ever did! I am an LLC with a Sub S Corp. I pay myself and my assistant through the same company who created the Smart Square for charging credit cards on your phone. They do everything including payroll taxes and our W2's at the end of the year. I pay myself a set amount. In my case $2000 every 2 weeks. $1000 goes into my bank account, $1,000 goes to pay taxes. I draw from the rest of my commission as needed. With my rentals and expenses for depreciation I now get a refund every year and save a ton in self-employment taxes.

 Your agent income is taxed fully differently than rental income. Rentals already don't pay that payroll tax it's allowing you to save, and keeping appreciating assets in an S corp is a landmind of liability for tax. 

I'm not sure if I understand you.

Are you saying that an S Corp and an LLC filing as an S Corp are the same thing for Tax & Asset purposes

Or Are you saying that an S Corp and an LLC filing as an S Corp are entirely different for Tax & Asset purposes?

 I wans't saying either of those things. But those 2 things you listed file the sale way for tax purposes. 

I was saying that there are different types of taxable income in real estate 

Agent income = Subject to SE tax

Rental income= passive, Not subject to SE tax

People like S corps for tax purposes because they allow you to save on SE tax. So they don't save you any type of tax on rental income. 

But having an asset in an S corp that is appreciating is a bad taxable sitaution- because if you ever need to transfer it out (to refinance, or a 1031 ect) it's deemed a taxable sale at current Fair market value. Even fi you're just transferring it to yourself. 

Hi Jose, 

There are several Tax professionals who speicalize in real estate here on the BP forums. I would reach out to @Steven Hamilton II or @Jake Hottenrott as a starting point. 

Since you haevn't acquired any properties yet I would honestly recommend waiting until April to interview as this time of year firms are pretty swamped with current year clients/filings. 

Chris Casey and Scott Hildebrand are both attorneys that specialize in REI in the area. 

Mark Canton CPA, and Traner Smith CPA both are REI spedcalized tax firms.