All Forum Posts by: Paul Allen

There are no tax benefits from placing a rental property in an LLC.

1031 exchanges do not exclude rental income from taxes. 1031 exchanges defer the capital gains and depreciation recapture taxes  generated from the sale of the property. 1031 exchanges absolutely apply to a long-term rentals. 

Best of Luck with Your Real Estate Investing!

I'd want to check your math (because ROI of 14% seems high on student loan payoff), but I'd take 14% guaranteed ROI all day long.

I think we'll see other opinions, though, as there is a 'personal preference' element to the question of reducing debt VS investing.

Best of Luck with Your Real Estate Investing!

Trustee-to-trustee transfer only...

https://www.irs.gov/publications/p590b#en_US_2017_...

Inherited from someone other than spouse.

If you inherit a traditional IRA from anyone other than your deceased spouse, you can't treat the inherited IRA as your own. This means that you can't make any contributions to the IRA. It also means you can't roll over any amounts into or out of the inherited IRA. However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary.

Like the original owner, you generally won't owe tax on the assets in the IRA until you receive distributions from it. You must begin receiving distributions from the IRA under the rules for distributions that apply to beneficiaries.

The thing you are calling "Book Value" the IRS calls "Adjusted Basis". 

To further complicate things, in your scenario the $200K of depreciation recapture would be taxed at "unrecaptured section 1250 gains" rates and the other $200K would be taxed at "capital gains" rates. Congress FTW!!!  :)

Unless market value is less than historical cost. Depreciable basis is based on the lesser of cost or fair market value (FMV) at the time the property is placed in service. Many people purchasing in 2006 and placing the unit is service in 2009 found themselves depreciating based on FMV. Fortunately that is somewhat less common these days.

Best of Luck with Your Real Estate Investing!

Lots of discussions on that topic here: https://www.biggerpockets.com/forums/519/topics/24...

Best of Luck with Your Real Estate Investments! 

We use a progressive system with multiple tax brackets, so the amount of your monthly net income determines the amount you should expect to pay in taxes.

https://www.nerdwallet.com/blog/taxes/federal-inco...

(Assuming you also pay taxes in California...)California also uses a progressive system:

https://www.tax-brackets.org/californiataxtable

Are you sure you will have taxable net income? It is not uncommon for rental properties to cash flow neutral or even a bit negative at first. Especially after depreciation expense is considered. It might be worth your while to sit down with a tax pro and come up with a solid projection for taxable income.

Best of Luck with Your Real Estate Investing!

@Account Closed the card does not need your business name on it to make the interest deductible. If you want to start using your current card purely for business, you can do that. I would zero out the balance first (pay off all your personal expenses) before charging business expenses to it. Note somewhere in your records "as of [date] I will be using my XYZ credit card exclusively for business". The concept is to be able to clearly demonstrate to the IRS - in the event of an audit - that you know an expense (and its interest) is business-related because that credit card is used exclusively for business. It's not required, but it makes good sense.

I buy coffee for my waiting room at my office -  a tax-deductible business expense. I also buy coffee for my house - not deductible. When the IRS audits me, I show them I bought coffee for the office using the same card used to purchase my software, paper, ink, biz insurance, etc. ONLY biz expenses go on that card, and then it gets paid off ONLY from a biz bank account. I want it to be as easy as possible for the IRS to conclude the business expenses I claim are legitimate.

It also makes it easier for me to know/understand/analyze the health of my business. That's the true value of accounting! (Even if we tend to get wrapped up in the 'satisfying-the-Tax-Man' mindset.)

Business interest is deductible. Personal interest is not deductible. If you don't have separate credit cards, determining which interest is business and which interest is personal each month is problematic. If you pay the balance in full each month and never pay interest, then it matters less to have separate cards for business and personal. Just have mercy on your tax preparer and divide all your statements into spreadsheets showing the business vs personal expenses!

Best of Luck with Your Real Estate Investing!