All Forum Posts by: Steven Hamilton II
Steven Hamilton II has started 25 posts and replied 5110 times.
Post: IRS says: No Capital Gains Tax for You if you sell your section 8 rentals!
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Sure can. This is being misinterpreted by the OP. There are no particular differences. It was referring to the higher tax rate on depreciation taken Most rentals are depreciated in a straight-line fashion. It was referring to property that was not depreciated in a straight line.
So, no you will still have a tax bill in this situation.
Post: Capital Gains Tax Questions
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @James Schulte:
We are residents of Missouri and have a Florida LLC that owns a short-term rental home in Destin, Florida.
We have owned it for almost 4 years now and would like to sell the home.
The purchase price was $779,000 and sale price will be $1,200,000.
We understand that we will pay federal capital gains and we understand the depreciation recapture aspect but we are unsure exactly what taxes we will be on the hook for since we are residents of MO and the home & LLC are in Florida.
Do we also have to pay MO income tax on the gain even though the LLC and house are in FL?
Is the gain from the sale added to our income to determine which federal capital gain rate we will pay?
Our normal income falls in the 15%($77,201-$250k) bracket.
Thank You
This is a prime situation where you should be speaking with your account to review the consequences as we are not familiar with your situation. There are a ton of variables.
Post: First time filing taxes as a landlord, questions...
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Eric P.:
Thanks for the reply. If I don't need to give the CPA my receipts, then I can just add everything up and give them a summary? Still have many unanswered questions before I can even prepare all this for the CPA. Used to mail my taxes away to my CPA when they were more basic, but I guess I'll have to find a local CPA and just stop in tomorrow... Just too many questions and don't really want to be spending time hunting down all the answers.
There are tons of us located across the country who work with clients worldwide. I'd recommend speaking to some of us on the board here such as @Natalie Kolodij or @Jake Hottenrott
Post: She broke another window!
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
You repair it and send the bill for it. Document from the professional what the source of that kind of damage is. Your lease should address this. it should also address how payments are applied. We apply to Repairs>Utilities>Late Fees>Rent. In that order
I would've posted a notice for her to remove the occupants and the kitten. You should start conducting regular inspections to check on this behavior.
Post: How to write off "Home Office/Showroom" Addition?
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Daniel Dietz:
Thanks @Steven Hamilton II, that makes sense. I usually like to over complicate things ;-)
Dan Dietz
Dan,
I know you do. but I get it. The whole topic of tax can cause many to over complicate it.
Post: Questions to ask a potential Accountant
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Scott Mac:
Q: What is an Asset?
A: A little Donkey!
Just trying to keep Accounting serious too.
Its accrual world
Post: Questions to ask a potential Accountant
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Michael Plaks:
Good list, @Steven Hamilton II
Maybe add "did Epstein kill himself?" :)
Funny enough I contemplated adding it in there; however, I was trying to keep it serious.
Post: How to write off "Home Office/Showroom" Addition?
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
You would depreciate your costs using the applicable percentage of whole house items and then you will have depreciation for your actual costs. I think you're thinkin a bit more into it than you need to because you get both.
Remember the area must be used "Regularly and Exclusively" for business.
Post: Questions to ask a potential Accountant
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Hello Everyone,
You definitely need someone qualified, does not have to be a CPA, could be an Enrolled Agent or an attorney. Just make sure they specialize in tax and have significant experience dealing with real estate investors.
If you need help in your search or want to verify something don't hesitate to ask.
For example: I have clients worldwide and things are just as easy as I e-mail them, talking on the phone. I even use Skype and TeamViewer to communicate with clients so I'd highly recommend looking for one of the best with great references that interviews well with you.
So look for someone you can connect with that works out for your situation.
Feel free to ask here if you have questions
I have here a compiled a list of questions that you can select which are most pertinent to your situation:
What was the most recent CE course you took and when?
What subject is/are your academic degree(s) in?
What is your specialty (tax accounting, tax representation, etc.)
How long have you been practicing?
How many clients do you have?
What percentage of your practice today is in real estate?
Have you represented clients in front of the IRA, and what is your success rate?
Will you share a reference(s) from your current client who runs a business similar to mine?
Will you share a reference who can speak to your representation before the IRA?
How can you or your professional network help me with entity structuring, retirement/estate planning, business analysis, etc.?
Help you define the appropriate business structures, both from a legal protection and from a financial/tax perspective
Help you create a tax strategy for your business that will allow you to legally keep as much money as you possibly can
Help you make smart decisions with respect to your individual real estate investments
Prepare your annual tax returns
Recommend other team members (attorney, insurance agent, real estate agent, etc) who can help make your business a success
What are your credentials?
What services do you offer?
What areas of tax and accounting do you specialize in?
What is your background and do you personally own real estate?
How would I be able to communicate with you? Can I get questions answered by email?
Given my circumstances, what business structure(s) do you recommend? Why?
Can you register the business structures for us?
How can you help in the various phases of real estate investing (acquisition through sale)?
Do you specialize in tax strategy? Specifically geared towards real estate?
How aggressive will you be in helping us keep as much money as possible?
What tax strategies/issues should I be aware of upfront?
How often would you suggest we meet to review our progress/plan?
Do you do tax preparation?
What software do you use (and expect me to use) to do our accounting?
Can you help me find other team members (attorney, insurance agents, real estate agents, etc)?
What is your schedule of fees?
Do you have references?
Some of the questions are duplicated in here for the reason of asking them a different way for a different response.
Also here is a link to another similar discussion we had on this topic (it is some very good reading): http://www.biggerpockets.com/f...
Post: Help with Account Software for Flipping Houses??
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Aaron McGinnis:
Originally posted by @Steven Hamilton II:
Originally posted by @Aaron McGinnis:
Things I wish someone had told me early on -
1 - as soon as you have money to count, get an accountant to do, at minimum, monthly reconciliations and year end taxes
2 - use quickbooks. It is a virtually universal skillset and will grow beyond what you will likely ever need it to do
3 - put quickbooks on a remote server
4 - use a bank that allows for employee log in to view transactions
5 - hire a VA to do day to day data entry. We have a guy in India who does a fine job and is so inexpensive I would literally be stupid to do it myself.
Set these systems in place early. I failed to do this as a young business owner and fixing the many problems that inevitably arose cost me tens of thousands to pay someone else to fix. Learn from my mistakes!
Edit to add: if you already have several concurrent projects, have your accountant also give you a monthly job sheet and move to a basis of completion or accrual method of accounting directly... do not screw around with a cash basis as it will bite you early on!
Have a VA do record keeping for you? I would never want to outsource that information outside the country. I've seen some very horrible things as a result of that strategy. Just be careful to protect your Personally Identifying Information. We spend so much time fixing the work of others it is insane.
Use a reputable firm for the VA, obviously. (We use mytasker) but otherwise... horrible things can happen in life and at some point you must accept that you have to trust people. Take reasonable precautions obviously.
Right now we pay about $11/hr for help doing things like data entry. An accountant will charge about 6 or 7 times that for data entry. Hiring a local person would be 2 times that minimum. When we off shored this job we reduced our cost for this work by 90 percent as we no longer needed someone full time in the office.
Key to staying in business... dont pay more for things than you have to. In the new global economy this means aggressively off shoring for repetitive tasks. Another thing we off shore is drafting work where we reduced our hourly rate for drafting from $150 to $15.
A good firm makes all the difference. I was just noting the buyer beware disclaimer as one of our team members has spent the last 20 plus hours correcting some serious issues in a set of books thanks to a VA.
Well done on vetting and finding something that works for you.