All Forum Posts by: Paul Allen

Welcome to BP. and congrats on your first couple of deals!

With respect to the rental - if it is inhabitable, advertise it for rent before you do any repairs or maintenance. This places the property 'in service' as a rental unit. Repairs and maintenance costs made AFTER the property is placed in service can generally be deducted as operating expenses in the year the costs are incurred .  Repairs and maintenance costs made PRIOR TO the property being placed in service must generally be capitalized (added to the depreciable basis) and the costs are recovered over 27.5 years as part of the building depreciation expense.

For example, let's say you spend $275 to have the place painted. If you have it painted after the property is placed in service you can deduct the full $275 as an operating expense in the year you paid the expense. If you have the property painted prior to placing it in service then you will capitalize the cost of the painting and deduct $10/year for the next 27.5 years from your taxes.

Best of Luck with Your Real Estate Investments! 

Seems like you are considering forming a 4-member LLC. The IRS will treat this as a partnership for tax purposes (unless you choose otherwise, and you DO NOT want to choose otherwise if you are leasing the property and collecting rents).

The partnership will file a form 1065 information return every year and deliver each partner a Schedule K-1 which is created as part of the 1065 preparation. The K-1 tells each partner (and the IRS) what each partner's share of the gains and losses from the partnership were. Those are recorded on your individual tax returns (form 1040) on Schedule E page 2.

Assuming the 4 partners in the partnership each receive 25% of the income and expenses, then each partner will deduct 25% of the mortgage interest expense on his/her individual tax return. That mortgage interest will make it to your individual returns via the K-1(s) delivered to the partner(s) after the partnership files its 1065 return.

Best of Luck with Your Real Estate Investing!

@Andy Grabis

There was a recent discussion on this topic you might want to read.

https://www.biggerpockets.com/forums/519/topics/56...

If that doesn't answer your question(s) - or stimulates additional questions - then fire away!

Welcome to BP, and Best of Luck with Your Real Estate Investing!

Maybe the question is WHY would you switch accountant/tax pro?

As a (non-accountant) tax pro I pick up new clients each year from people who are switching. Top reasons seem to be:

1. New to area (large military population here, so this is common)

2. Former pro retired, quit, or moved.

3. Former pro did something to lose the trust/confidence of the client. 

4. Financial planning clients (I am also a financial planner) want to consolidate tax prep and financial planning under one roof.

I concur with the previous responses. Taxes are not your biggest concern when it comes to investing in a mutual fund. Loss of principal is a much greater risk - especially in the short term. When it comes to investing, less than 5 years is short term.

That leaves the question - what is your tolerance for investment risk with this money? Can you quantify it? For example - would you risk a 50% chance you'd be down 10% for a 50% chance you'd be up 12%? If you can quantify it, then you can build a portfolio that fits your risk profile. It's building an accurate risk profile that most people have trouble with. Even then, you're still dealing with statistical probabilities - meaning there's a chance your results will be better or worse than the models.

If you're married, building a joint risk profile can be geometrically more difficult. 

Best of Luck with Your Real Estate Investing!

 I don't see anything in the code that mentions what you did with the property FIRST. 

The code says all rental periods are NQU, but makes an exception to NQU for what you did with the property LAST. 

From Section 121 of the code:

(i)In general

The term “period of nonqualified use” means any period (other than the portion of any period preceding January 1, 2009) during which the property is not used as the principal residence of the taxpayer or the taxpayer’s spouse or former spouse.

(ii) The term "period of nonqualified use” does not include—

(I) any portion of the 5-year period described in subsection (a) which is after the last date that such property is used as the principal residence of the taxpayer or the taxpayer’s spouse,

>>>>>>>>>>>>>>>>>>

So....any rental period BEFORE it was a primary residence is NQU.

(Unless another exception applies :P )

Hi @Anna Marie. Welcome to Bigger Pockets! This is a good place for financial advice. Just remember it's a forum primarily for real estate investors, so most of the responses you'll get are from the perspective of people who prefer real estate as their investment vehicle. If you're looking for other perspectives you might also try the forums at "Bogleheads". Just google it, you'll find it.

Best of Luck on Your Financial Journey.  

Yes and yes.

I've used them for about 2 years for investment account aggregation. It provides a nice snapshot of the balance sheet. I do not use them for budgeting. Don't care for that interface.

I could do without the frequent solicitations for additional (paid) services, but I get it. They are running a business.