All Forum Posts by: Russell Roberts

I also discovered a great podcast and blog post on this topic.

Who Said All HELOC Interest Is No Longer Tax Deductible?  

Who Said You Can’t Deduct HELOC Interest? – Interest Tracing Explained

@Michael Plaks  Great, helpful, and clear answer to a difficult question!!   Thank you.  

I did a cash out refinance on my primary residence in 2017.  I did Not use the loan proceeds to buy, build, or substantially improve my primary residence.  Instead, I used it to fund other real estate investments.  Some was used for down payment on single family rental properties.  Some was used to invest as limited partner in a larger syndication deal which provides me with a K-1. 

With the 2018 tax law changes, I understand that the interest expense no longer qualifies as deductible on my itemized federal income tax because I did not use the loan funds in a qualifying way (to improve the primary residence).

My question: Can I match up this personal residence interest expense against my investment property income from the single family rentals and K-1 returns?  That is exactly how I used those loan proceeds..    thanks for any advice.

Both replies are VERY helpful.  Thank you for the advice!!

In 2018, I started some LP investing in syndications.   I was thinking that the tax filing with this would be easier than direct real estate ownership because I would simply get a K1 from GP sponsor to input into my federal income taxes.    

My questions:

1) Some of the K1s I've received also contain state level K1 equivalent (and some do not).   I have at least 10 different states represented.  Am I responsible to file state level returns now?   Is this complex enough that I need to start using a tax advisor?

2)  A couple of the K1s I should have received by March 15 are still not received.   I may have to file a federal tax return filing extension in order to wait for receipt.  Is this unusual? 

thanks.

Great input above.  A related question: 

I understand that the IRS expects estimated taxes to be paid quarterly (or risk paying IRS penalty and interest), but the K-1 is generated annually.   The distributions during the year are Not the same as taxable income on the year end K-1.  So do you know how an investor would be expected to pay quarterly estimated taxes with any degree of accuracy in this situation?  Just guess on the high side for the quarterly estimates?

My real estate investing has been largely passive and out of town investments, consisting of single family properties operated by property manager or I'm a limited partner in a syndicated investment controlled by the sponsor.    If I decide to take a trip to go view a property just to see with my own eyes what the property's condition is, can I tax deduct the travel expense related to the out of town trip?   Or does my status of only a passive investor prevent that from being a legit expense for tax deduction?

Join these Clarksville specific networking opportunities

- https://www.meetup.com/ClarksvilleRealEstate/  (evening meetings monthly)

- https://www.facebook.com/groups/275417296317639/   (private RE investors discussion group and occasional lunch meets)

I'm having similar challenge. I own outright 47 acres of farmland that is rented to good farmer, yet the annual return to me averages only 3% of the market value. Land appraises for $5000/acre. I don't want to sell land for sentimental reasons. I'd like to cash out as much equity as possible in order to invest in other real estate where I'm certain of much better ROI. My credit worthiness metrics are great. The first 2 lenders I've talked with declined interest. A 3rd needed to know exactly and pre-approve how I was going to use funds, even though the farmland would be security for loan at a 75% LTV. A 4th referred me to their commercial lending, which is where I going next. I'm just surprised how much harder this is than doing an equity cash out on a residential property..

I'm trying to make that decision now.   On my first 2 investment properties, I declined mortgage escrow for tax/insurance and remember to pay on my own.  I'm now on my 3rd and thinking about administrative simplification.  Is there any disadvantage or extra cost with having tax/insurance escrowed with your mortgage payment?