All Forum Posts by: Natalie Kolodij

It blows my mind when MULTIPLE highly trained, experts in REI taxation comment

And people choose to ignore it and ask for advice of others who aren't professional just because it is what they want to hear. 

Google "Should I keep rentals in S corps" And read the thousands of articles on the topics. 

Your effective tax rate is after all of the personal credits, standard/itemized deduction, ect that you personally qualify for. 

So one person's 100k of net business income will be at a totally different rate than another peron's based on their overall tax situation. 

If you're open to working remotely there are about 20 regular tax pros who provide infromation/help here on the forums. I'd read through some and see who seems like they'd be a good fit for you to work with. 

Reach out to Chris Casey in Seattle. This is up his ally. 

Are you in business yet? 

Or have you incurred all these expenses but don't own rentals yet? 

Or are you trying to flip/wholesale? 

The difference may determine tax treatment - LLC is unrelated to being in business/ writing off expenses.

Option C is tricky- because typically you don't want rentals in S corps. 

So in the future if you ever need to transfer it to your personal name- that will be taxed as a normal sale at current fair market value . 

In the future if you do a 1031/ect it will be another rental(s) into the corp. 

For many people holding the property and refinancing out equity/forgoing the 121 exclusion makes more sense froma  numbers POV. 

Work with your tax professional to weigh out the actual numbers on each

If you're looking for someone who specializes in REI another great resource is bigger pockets. Check out the referral options under network- and see who's active in the forums/ providing good information for investors. Not all CPA's or Tax pros know real estate well.

Just as a summary in case this thread gets brought up again: 

Having an S corp on earned income (comissions, sales, flips, wholesaling) Can save on payroll taxes, however I don't typically recommend it if earnings are under about $70k. The costs of an S corp for an additional tax return, payroll expense, full books, ect- often doesn't outweigh the savings if earnings are lower than that. 

Rentals don't pay any payroll tax- and there are big downfalls to holding them in S corps as detailed above. Never keep rentals in S corps. 

Joe provided a great answer. I would recommend working with a REI specialized tax pro to ensure you're getting the most out of the large expense going into a renovation.

 I just got a new client who's prior CPA fraudulently made up $30k of expenses anually against their $3k a year of sport coaching income in a partnership on which he used himself (the CPA) and the 2nd owner to allow a partnesrhip. 

CPA doesn't myean you'll be okay. 

Also, I amend countless returns annually by CPA's who don't know real estate. 


Find an industry expert who's proven to know real estate, not just some CPA.