All Forum Posts by: Steven Hamilton II
Steven Hamilton II has started 25 posts and replied 5110 times.
Post: Business Deductions that don't count against home buying income
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Patrick Reed:
I am a self employed sole proprietor. I am looking to buy my first house this year so I am being extra careful with my final tax number and not deducting too much.
However, the SEP tax is really killing me, and I am owing a lot more than I expected. I was hoping to find a way to lower my taxable income without hurting my buying power for a property.
Does anyone know of any deductions that a bank won't count against me when assessing my income for DTI ratio?
I heard that banks don't count certain types of deprecation against income, but I could be wrong. Thanks for the help.
Are you flipping or wholesaling? Otherwise, what is your self employment from?
Post: Chicago Tax Accountant Recommendation (house hack & rehab cost)
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Jonathan Klemm:
@Kevin Scanlan Jr. - I would definitely connect with @Steven Hamilton II. He's done my taxes the last 3 years here in Chicago and he works specifically with real estate investors.
He understands all the minute tax details and works with you to strategize ahead of tax day instead of being reactive at the last minute. He just gave a great presentation at @Weston Harding meetup yesterday.
Thanks for the tag. We have clients worldwide. And I'm right in the north suburbs.
Post: Rent paid Dec.31 for Jan. Goes on what years taxes
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Natalie Kolodij:
Originally posted by @Jacob Sampson:
Originally posted by @Natalie Kolodij:
Originally posted by @Jacob Sampson:
Originally posted by @Natalie Kolodij:
Originally posted by @Jacob Sampson:
Whichever year you want. In general, I would put it on the year it was meant for. Meaning, if it is Jan 2020 rent put it in as income for 2020.
No you can't just choose.
Landlords are cash basis- when it's received is when it's reported.
I defer to your education in this area.
I believe you. I am just not willing to skew the picture of my business simply because a tenant deposited rent 1 day early. Meaning, now my property looks overly profitable in one year and less profitable the next. I may be breaking the letter of the law but not the spirit. IMO.
It's not skewing your business- it's reporting accurately.
What if someone prepays 6 months rent? or a year?
Your tax returns should follow tax laws- your personal financials can follow what ever you'd like for your information.
Amen! This is not Burger King. You don't get to have it your way.
Post: Mortgage interest & PROPERTY TXS PD YTD no longer matter? T/F?
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Joyce Jackson:
@Linda Weygant This I believe indeed is the case. I was really surprised how much I had to pay in 2017 because there were about 98k in renovations repairs etc but we didny deduct any of that. Thank you for explaining this to me. He has always been very good up until we started including our rental properties. I didnt know enough about this. Thank you for taling the time to explain it to me.
@Joyce Jackson,
Linda is exactly correct. He should have talked to you about bonus depreciation and how to categorize your expenses and improvements during renovation. Another big item would be Cost Segregation. It is quite possible he is leaving a lot of money on the table for you for every property that was placed in service during 2019. Let Linda or myself know if you need help finding someone to assist you with your tax returns as we have referrals everywhere. I know Linda also works remotely.
Post: Depreciation Calculations-please help to figure it out
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Erik W.:
@Mary Jay, chiming back in with a clarification on the 80/20 rule for structure & land. I should have clarified that this is a commonly used rule in MY town, where land is relatively cheap compared to the price of the structure. For example, a little $40K house I bought recently had two vacant, identically sized residential single family house lots on the same street listed for sale at $5,000 and $6,500. Doing the math we see that the land under my little house should be approximately 12.5%-16.25% of the total purchase. If I wanted to be super aggressive, I could allocate more than 80% of the purchase price to the structure. I save a copy of the listings in a folder so if the IRS ever decides to audit me, I will have documentation to show that my allocation percentage was reasonable. Too, the 80/20 rule is what my CPA recommends. He's the Pro, so I go with his advice especially when it seems well supported by our local market.
Yes, an appraisal can be used, but to clarify that too I would not rely on a County Assessor's appraisal. In my area, those are off, sometimes by a considerable amount. If you were to take out a loan, then perhaps the appraiser who run the numbers for the bank would be a good resource.
@Natalie Kolodij gave some great advice, and I recommend checking with a competent local professional for anything to do with taxes/legal issues. Anything posted on BP should be taken with a grain of salt and/or general advice to give you ideas so you can start investigating on your own. Real estate values, customs, and "rules" are almost always local.
There is no 80/20 RULE. That is made up bs used by lazy people. Occasionally where we are absent a physical land value using an estimate of other property works; however, you must have a reasonable method.
Post: Can W-2 employee qualify for real estate professionals?
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Not if you work full time. You have to spend more time in real estate than in any other activity. And that time has to be at least 750 hours.
You can qualify as a real estate professional even if you work full-time in another business. However,
some businesses are better suited for this than others.
According to the IRS, you qualify as a real estate professional for purposes of the passive loss rules if you
meet both of the following:
- You perform more than half of your personal services (think “work”) for the year in real
property trades or businesses in which you materially participate. - You perform more than 750 hours of services during the year in real property trades or
businesses in which you materially participate.
Both prongs of the test require you to spend a great deal of time working in “real property trades or
businesses.” What does that mean? According to the IRS, it can mean a profession in any of the
following:
- Development
- Redevelopment
- Construction or reconstruction
- Acquisition
- Conversion
- Rental
- Operation
- Management
- Leasing
- Brokerage
Post: Setting up HSA’s, IRA’s, or Corps at tax time
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
No, a corp cannot be done at that time. @Steve Legnaioli it must be set up ahead of time. Reach out if you have any issues as I have colleagues across the state of FL.
Post: Tax abatement specialist NYC
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Thank you @Natalie Kolodij. I do a ton of representation before the fed and most states.
Post: Real Estate Attorney and CPA consultation: best practices
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Leta Eydelberg:
Hello,
We are looking for Real Estate Attorney and/or CPA to consult about best practices for buying and managing investment properties.
A little of our background.
We are located in North California. We owned one investment property which we just sold and are in the process of doing 1031 exchange for multiple properties. We have tons of questions. For example:
Our old property was in our name, and we'd prefer to have LLC instead but were told that we cannot change ownership status during 1031. Is that correct? What should we do?
How to set up LLC and transfer ownership of the investments? How to process payments and what accounts to use? Basically, what are the best practices to do to protect us and from the tax standpoint?
We would really like to urgently find a knowledgeable attorney and CPA to work with.
Thank you for any advice and recommendation!
Personally I'd consider avoiding the LLC in CA due to the minimum $800 franchise tax. I'd just purchase more insurance. You may want to discuss that over with an attorney.
The post above is correct the time to find an accountant was in November December or before the 1031 started and not during it and during tax season.
Best practices are keeping separate accounts, detailed books and all records to ensure that you are tracking every expense.
Post: SDIRA AIRBNB UBIT TAX
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
You can do no more than to treat it the same way you would and investment into a stock. You can do very little. I'd typically advise against buying such a property in an IRA unless you are just a cash partner and someone else is doing the work.