All Forum Posts by: Nicholas Aiola

Hi, @Septimiu Sarca . If your personal residence is sold after January 1, 2018, you will immediately be subject to the new law. There is one and only one exception, however... If you have a written binding contract in effect before 1/1/18, but the sale closes after, you will be allowed to use the "old" 2-out-of-5 law.

@James Canoy Typically, it's a good idea to sell the "losers" when you've also sold some "winners" throughout the year. When you sell them isn't really that important, as long as it's in the same year as the gains you're trying to mitigate/eliminate.

Capital losses can wipe out 100% of capital gains. If your losses exceed your gains in any given year, you are allowed to deduct up to $3,000 against your other income. Anything in excess of that can be carried over into future tax years.

Does this answer your question?

@Paul G. Depending on the structure and activity of the LLC, that 23% deduction could apply. I was making a general statement that rental LLCs don't typically pay guaranteed payments to their members and, in that case, the 23% deduction would not apply.

There is an exception (of course), however... If the business owner's income is less than $250,000 (single) or $500,000 (married filing joint), the wage/guaranteed payment limitation does not apply. In this case, there would certainly be a benefit (the 23% deduction).

So, it would depend on the scenario, but I wouldn't say there are no new advantages or disadvantages; it really depends on the entity.

Hi, @Demario Lewis 

Great question... The answer is yes.

Buy & hold rental income is considered passive income, reported on Schedule E, and taxed at ordinary rates. Selling a property you held and rented out will be subject to capital gains tax (and depreciation recapture).

Flips and wholesaling are treated as active businesses, reported on Schedule C, taxed at ordinary rates, AND subject to self-employment tax. Selling a flip is taxed at ordinary rates, not at the capital gains rates, because the IRS treats properties as inventory in this case...basically like buying and selling goods.

@Mike Dymski The House initially proposed the max rate of 25% on (most) pass-through entities; the Senate countered (I would guess as a compromise to the slashed corporate rates) by initially proposing a 17.4% deduction instead of capping the rate, but Senators Ron Johnson and Steve Daines were holding out on their "yes" votes. 

In the extremely speedy process of updating the proposal once again, the Senate bumped the deduction up to 23% to satisfy Johnson and Daines.

As with everything tax, there are stipulations, exceptions, and, because the changes to the proposal were so rushed, a huge opportunity to identify loopholes, so that should be fun.

@Account Closed As it stands now, it will be your 2018 tax return

@Mike Dymski In the most updated Senate bill, the proposal for taxation of pass-through income is to keep the income taxed at ordinary rates (which were modified), but offer a special 23% deduction on qualified pass-through income. This 23% deduction, however, is limited to 50% of W-2 wages or guaranteed payments paid out of the pass-through entity.

That's a problem for buy & hold investors. Why? Because usually, rental properties are held either in the name of the owner or in an LLC and, in those cases, wages are rarely paid (wages are required to be paid for S Corps, not LLCs). So, this all but eliminates that "special" deduction for buy & hold investors.

Keep in mind, this is not yet law. Apparently, the GOP said earlier today that they have reached a deal on the tax bill (whatever that may mean), so this could possibly change (again) once that news breaks. If this part stays as is, it's slated to take effect beginning January 1, 2018.

Hi, @Nick White !

There are two aspects to your question as I understand it: cash flow and tax implications.

For purposes of cash flow, LOC payments can technically be made from anywhere you want. Does that mean they should be made from your personal account? No. Ideally, you should pay the LOC payments with the rental income of the newly acquired property, which brings me to the tax implications...


Interest on the LOC will be deductible against the rental income of the newly acquired property (assuming you use all the LOC funds to purchase and/or improve the new property), which is why it makes the most sense to pay it using rental income.

I hope this helps!

Hey, guys!

I've been on BP for about 7 months now and I have quickly learned two things:

1. There is no better place than BP to talk real estate
2. The wealth of information on BP is immeasurable

I've read and learned quite a lot while scrolling through this site, and figured I'd create an open forum to (hopefully) offer some help and advice back to the BP community.

I'm a CPA in New York with a passion for real estate and I'd be happy to answer any tax questions I can!

Thanks, @Daniel Ortiz :)

@Jackson Tate Feel free to PM me if you have any questions!