All Forum Posts by: Corey G.

Quote from @Alecia Loveless:

@Corey G. It never occurred to me that this was a thing.

I just use my personal vehicle for everything and keep track of mileage.

I’d think this might be a question for your accountant. Or an independent insurance broker.

I bet the basic insurance representatives at Progressive or whatever don’t know enough about the situation to actually make this call.

It seems like if the business designation was $350 more expensive then of course that is what they said so they’d make more money.

The problem is now that I've asked them and supposedly they checked with underwriting they could potentially deny my insurance if it's classified incorrectly from what I understand. And this is an independent insurance broker that checks with multiple companies for cheaper prices ect. 

Quote from @Owen Rosen:

Quote from @Corey G.:

Quote from @Owen Rosen:

Quote from @Corey G.:

I've been a property owner for about 13 years now. I just bought a new cargo van and I previously had a pickup truck I replaced. My pickup was under my insurance for personal use but when I added the cargo van, I put it down for business use. After talking this over with some insurance brokers, I'm not sure it needs to be classified as business use. To clarify, my properties are not currently in LLCs or any other structures, just solely in my name. I do not have a business license and my rental income is considered passive. Since I own these properties (and the home I live in), I was explained by the broker that when I visit my properties, even to do repairs or haul appliances, I'm essentially just transporting tools/appliances from one of my properties to another one of my properties (not a business). It's like I'm working on my own personal house, or hauling appliances from home depot to my house and neither of those examples would be business use. Essentially, because my van is not registered to business license or LLC, and the income is not active business income, then the vehicle could be classified as personal use. The logic makes sense to me but what does everybody think of this and what do you have your insurance use as? Additionally, I have a car that I sometime use to show the properties & sign the leases. I don't really consider this business use either but should I?

Are you referring to personal auto insurance vs. commercial auto insurance or a business usage classification on a personal auto insurance policy. These are different things.

personal auto insurance business use classification

 Do you use the van for anything other than visiting your properties?

It's probably in a gray area.  That said, the pricing difference for business use on a personal lines policy vs. commuting or pleasure usage is likely nominal.

I use it for mostly just transporting supplies, hauling my tools over to do repairs, that kind of thing. Sometimes I stop for groceries or at a restaurant on my way back from the property. I called my broker who signed me up with progressive a while ago and the lady didn't know so she called the underwriter and they said it has to be classified as business use. Personal use is about 350 dollars cheaper for the year. It's not a bunch but the insurance just went up because I got the van (and last year I was in an accident). I have my liability set pretty high because I need to keep minimums for umbrella insurance but with this and landlord insurance everything is pretty darn expensive. 

Quote from @Owen Rosen:

Quote from @Corey G.:

I've been a property owner for about 13 years now. I just bought a new cargo van and I previously had a pickup truck I replaced. My pickup was under my insurance for personal use but when I added the cargo van, I put it down for business use. After talking this over with some insurance brokers, I'm not sure it needs to be classified as business use. To clarify, my properties are not currently in LLCs or any other structures, just solely in my name. I do not have a business license and my rental income is considered passive. Since I own these properties (and the home I live in), I was explained by the broker that when I visit my properties, even to do repairs or haul appliances, I'm essentially just transporting tools/appliances from one of my properties to another one of my properties (not a business). It's like I'm working on my own personal house, or hauling appliances from home depot to my house and neither of those examples would be business use. Essentially, because my van is not registered to business license or LLC, and the income is not active business income, then the vehicle could be classified as personal use. The logic makes sense to me but what does everybody think of this and what do you have your insurance use as? Additionally, I have a car that I sometime use to show the properties & sign the leases. I don't really consider this business use either but should I?

Are you referring to personal auto insurance vs. commercial auto insurance or a business usage classification on a personal auto insurance policy. These are different things.

personal auto insurance business use classification

I've been a property owner for about 13 years now. I just bought a new cargo van and I previously had a pickup truck I replaced. My pickup was under my insurance for personal use but when I added the cargo van, I put it down for business use. After talking this over with some insurance brokers, I'm not sure it needs to be classified as business use. To clarify, my properties are not currently in LLCs or any other structures, just solely in my name. I do not have a business license and my rental income is considered passive. Since I own these properties (and the home I live in), I was explained by the broker that when I visit my properties, even to do repairs or haul appliances, I'm essentially just transporting tools/appliances from one of my properties to another one of my properties (not a business). It's like I'm working on my own personal house, or hauling appliances from home depot to my house and neither of those examples would be business use. Essentially, because my van is not registered to business license or LLC, and the income is not active business income, then the vehicle could be classified as personal use. The logic makes sense to me but what does everybody think of this and what do you have your insurance use as? Additionally, I have a car that I sometime use to show the properties & sign the leases. I don't really consider this business use either but should I?

I wasn't calling him an accountant, I was concerned who I would reach out to wouldn't have the expertise and I wouldn't know the right questions to ask. Michael wasn't exactly offering his expertise to me... so what does it matter what credentials he has? Besides I'd be looking for someone local. I'm wondering why both of you are on here not offering any help or solutions, just to criticize me for asking a dumb question (that I didn't think was so dumb from reading other posts in this forum). At least Patrick chimed in offering to help with a referral. Perhaps you both should go bash on someone else's post for a while and let the people who want to help chime in on this one.

I was planning on getting a CPA, but not knowing the right questions to ask of someone who I don't exactly trust yet (as a new customer) isn't the best way to go about things. If I have some insight into the general strategies of how to do what I am asking (which is what I was trying to get asking these questions) it would help me during that conversation. The fact that I can regularly speak to many real estate finance "experts" and many of them are uninformed about certain financial rules/options is one of the things I've had to learn the hard way. For instance, one "expert" I wasted my time/money on because he wasn't as informed/educated as he pretended to be. After spending thousands of dollars, I had to get someone else to fund my loan. So using this forum to gain a little advice on strategies (I read online and elsewhere in the forum) seemed like a good place to start. But instead of getting steered in a direction of right/left per your example, I'm told "you shouldn't be messing with concepts you don't understand" and "it's not simple, go get some advice from a real tax pro" who in all likelihood will just be an accountant who files taxes for a living and has no real experience with these concepts and will tell me it's not worth it, like Mike did. 

Quote from @Michael Plaks:

@Corey G.

I know what BP is for and what this forum is for. Some questions are simple and can be answered on a forum. I have almost 5,000 posts where I've been answering these questions over the last several years.

What you're asking is a complex one. It does not have a one paragraph answer. Especially since you're clearly confused by several tax concepts that you read/heard about.

 Except you clearly posted that what I wanted to do likely wouldn't work. All in about a paragraph... so it seems a pretty easy to answer question after all.

"You and your friends should not be messing with this when you don't understand these concepts well, and they are confusing."

Who is messing? I'm asking if it's possible before I go through the hassle of hiring a CPA for one question that I find out is probably not doable or worth it. 

"See, it is not simple. Get yourself some good tax advice from a real tax pro. But right now none of us has time due to the April 15th deadline."

Who said it was simple? I asked if it was doable. You make it seem like everybody should go set up an appointment with a professional anytime someone wants to ask one question about a particular topic... that's kind of the point of the forum. Bigger pockets wouldn't exist if every answer was "just go hire someone".

If I needed to speak with a professional every time I had a question about real estate, I wouldn't have got to the point where I've essentially made this my full time job/retired off my rental income. 

So I posted the other day asking if I could get around passive income on my rental properties so I could contribute to my retirement account. Post here: https://www.biggerpockets.com/forums/51/topics/1183339-contr... I read that it was possible to create a PM company under an LLC and pay myself to manage the properties but then I would be subject to 15% Self Employment taxes. However, now I'm learning that I should be able to do the same thing and just classify the LLC as an S Corp when filing my taxes and it avoids nearly all of the self employment taxes. This would then allow me to create a solo roth 401k and contribute a substantial amount more to it than just a traditional roth IRA. Has anybody done this? Do I have the gist or am I missing something important? I don't have a CPA yet and so I don't have anybody to ask currently. (I need to shop for one as I don't have a lot of friends doing the same thing as me in my state.) If this sounds like it's doable, then I'll need to find one and get the process started. Any information or experiences are appreciated.

Quote from @Brett Synicky:

Quote from @Corey G.:

Quote from @Brett Synicky:

@Corey G. you’re on the right track.  You can definitely create a pm company like you mentioned.  It isn’t hard to qualify for a solo 401k.  Drive Uber, door dash, sell things on eBay/amazon.   Network marketing.   There are many benefits to solo 401ks over sdira, one of the biggest being the high contribution limits so with my examples you likely won’t make very much but for 2024 you can contribute up to 100% of what you make up to $23,500 and since you don’t need the money to live on this would be a good way to add more money to a Roth solo.  

So what are the downsides of creating a PM company and paying myself? I think there are self employment taxes. I heard that contributions are limited to 20% for a SEP IRA but are you saying the solo 401K is not limited?

 If you're incorporated (s-corp) on the employe side you can contribute 25% of what you paid yourself for the year.   Sole prop/single member llc is 20% of the net profit for the year.  This cannot exceed $69k or if over 50, $76,500.  You can contribute up to $23k on the employee side, $30,500 if over 50.  Both of these combined cannot exceed the total of $69k/$76,500, however that entire amount can come from the employer side if you don't contribute on the employee side.   The thing to note is that if you don't need the money to live on you can contribute up to 100% of what you pay yourself/net profit.  Sep works the same on the employer side and does NOT have the employee contribution, among other things.   Hope this helps.  Check with your CPA.  

I don't have a CPA at the moment so maybe I should try to find one. However, what you said confused me a little because you said that I could contribute 25% or 20% depending on if it's an S-corp or LLC but if I'm reading you correctly, those limitations are only on the employee side? Employers side doesn't have that same restriction and so they can contribute 100%? Is that what you meant by "if you don't need the money to live on".

Ideally what I would want to do is pay myself about 7000-10000 per year or so, pay self employment taxes out of there and then contribute the remainder to a retirement account. But if I'm limited to 25%, I wouldn't be able to contribute nearly as much to make it worth it due to paying self employment taxes on the other 75%. Additionally, as the sole person running this business do I need to set it up for my properties to pay the PM company and then the company pays me as an employee or since I'm the owner of the company I don't have any employees and so there would technically be no employee side? 

I asked this question elsewhere and someone said that they do this but do not have an LLC and are a sole proprietorship and just file with a schedule C. Does that sound like it would work? I'm concerned about losing the QBI deduction because then the "management company" would be the one active in managing the business.