All Forum Posts by: Samuel Kim

I have a few CPA's that I could recommend. However if you are looking for them to prepare your 2024 returns, they are too busy right now. 

If you have high W2 income, the amount your STR makes (or loses) will be peanuts compared to the tax savings. Way better returns on the cost seg than you'd ever cash flow from an LTR.

 I would definitely be talking to a real estate savvy CPA- there are lots of armchair tax experts on BP and you can get really confident and incorrect advice. 

Have you considered just having one be an STR and using the loophole?

I think it will be very difficult to show 750 hours, most tenants deposit the rent, so there is no rent collection. unless you have a very high turnover of tenants, where  you need to show the houses again and again,  I am not sure where you can "find" all those hours for her, especially that you say the properties are newer, so how much repairs would you have? and frankly most landlords send a technician to fix things, not go there themselves, same goes for lawn care, usually you have a company that comes every week/other week, you do not need to be there.... 

I also  am not sure her getting her real estate license and sell a property a year as someone suggested will qualify for the 750 hours.

I know we all want to make money, but we do not want to raise red flags.... 

@Michael Plaks

Sorry if I wasn’t clear. My issue isn’t with the substance of your comments—it’s with your behavior. You accused other licensed professionals of giving "totally irresponsible and reckless advice" in a public forum. I don’t know what license you hold, but if I make a claim like that in a public forum against other lawyers, at minimum I am facing an ethics complaint. You can’t make an accusation like that and then walk it back by calling it a disagreement over a "customer service issue." That’s ridiculous.

And what has been accomplished? Based on his last post, @Samuel Kim now seems to think it’s pointless for him and his wife to explore this topic over posts made by professionals who barely know anything about his situation. The fact that he’s walking away from this thinking it’s a dead end is more irresponsible and reckless than anything anyone else has said. 

The only correct advice is, "Go talk to a professional."

Disclaimer: While I’m a licensed attorney, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Samuel Kim Your wife can meet the 750-hour test for Real Estate Professional Status (REPS) by actively managing your 9 rental properties, but careful planning and documentation are essential, especially with low-maintenance new construction. Activities like tenant management, marketing, bookkeeping, inspections, overseeing contractors, and compliance tasks all count.

Avoid outsourcing tasks, as this reduces eligible hours, and consider adding properties if meeting the threshold is challenging. If she qualifies and materially participates, passive loss limitations won’t apply, allowing you to offset your income with cost segregation and bonus depreciation.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

@Samuel Kim

Even though I already gave you an answer earlier on this thread, I need to add a few comments after seeing some totally irresponsible and reckless advice given by other commenters.

Short story is:
A. Can your wife qualify for REPS in theory? Certainly, this is a common strategy.
B. Can she qualify in your specific situation? No. Not unless she adds more real estate work.
C. Can you try something else besides qualifying your wife for REPS? Maybe. STRs for example.

You were told...
"she can...  but careful planning and documentation are essential"
"...making sure that your wife understands what she needs to do to document her hours and activities."
Huh? Documenting WHAT?!? C'mon now, let's be real. You cannot document something that does not exist. Drop that empty hype, fellows. Yes, I said that, I call things what they are, I'm that old grumpy dude.

We need 750 hours. Where do we get it from?

From repairs and maintenance? Fine. How long does it take you to manage a maintenance request from your tenant? 1-2 hours per incident. Oh, I see, you are not going to hire a plumber. You are going to send your wife to personally unclog that toilet. Well, enjoy the couch tonight. But also, how long does it take in this case? OK, I will give you 5 hours. But we need 750 hours per year - or 15 hours per week. So we need 3 maintenance incidents per week, personally handled by your wife. Every single week, 3 incidents. Sorry, I'm not buying this story.

From make-ready's. Sure. How long does that take? So your wife will spend 5 full days repainting the whole place and scrubbing the bathtubs. Ok, we got 40-50 hours, tops. You had 3 of your 9 properties changing tenants. Yay, we have 150 hours!!! Still need another 600 hours. Which is 2 (instead of 3) 5-hour maintenance gigs every damn week.

From tenant changes. Gotcha. How many applicants did you interview? How long did it take you to negotiate the lease and oversee the move-in? 

From visiting properties? You visit occupied properties? For what? How often? For how long? No, it's not a normal business practice and does not pass the smell test.

From driving? Travel time has been treated unfavorably by courts, with a few exceptions. If you rely on travel time to meet 750 hours, you're playing Russian roulette with the IRS. And even then - travel where, how often and, most importantly - why?

From watching YouTube gurus and listening to BiggerPockets podcasts? Nice try, but this time does not count.

In order to meet 750 hours, your wife will need one of the below:
- do something else real estate related, like wholesaling or realtor
- actively work on expanding your rental portfolio 
- have an extensive DIY rehab, like a month-long full-time rehab (and then she might need another kind of rehab)
- a calamity such as multiple properties damaged in a storm where she will have to deal with insurers and contractors
- something else out of the ordinary

Again - if all you have is 9 single-family properties with stable tenants and typical occasional maintenance - you don't have enough work to collect 750 hours. Need something else besides lightly managing these 9 doors. 

 Just tell her to be the most inefficient, slowest worker possible 🤣.

Not sure how far the houses are, but could she do drivebys of each one every week as well?

I'm not sure if you are planning to buy more, but I think if she becomes an agent then her time looking for properties would also count. Definitely double check that though.

Does she handle all the tenant communication? Hiring lawn care? Maintenance scheduling (I realize it may not be frequent)?

To get those hours, maybe turn one or two into medium term rentals (you want the average stays to be over 7 days so they don't fall into STR status) which would give her more to do, particularly in the first year of furnishing them and getting everything set up.

Alternatively, she maybe she could manage the properties but also get her RE license and try to sell a house or two a year - go to lots of open houses or run them for other agents?

Just ideas, talk to your CPA to make sure you are doing it properly.