All Forum Posts by: Taylor Brugna

James Free Anthony Dooley The basis would the lesser of the FMV or the adjusted basis at the date of conversion. In this case, you are telling us that the property has appreciated significantly. I would assume the price paid+capital improvements is less than the FMV, therefore the adjusted basis is what you would use. Hope this helps.

Sandra Roddy I can assure you house hacking won't stress out a good CPA :) I see your point though, focus on high value tasks that align with your skill set!

Sorry for the typos- typing on my phone!

David S. 1) Take consideration one of the biggest tax advantages of real estate- the capital gains exclusion for a primary residence.The owner occupied portion is actually more beneficial from a tax perspective.You don't have to pay capital gains or depreciation recapture on this portion (you're not depreciating this portion), and the interest and taxes on your schedule are not limited like passive losses are with rental properties. 2-3) Regarding the basis, it's really a line by line discussion. Items paid by the seller would not be includable in your basis for the property-you didn't pay them.

@Account Closed This is exactly the type of return you do not want to be using turbotax for, but I'll try my best to help. House hacking is one of more complicated tax situations involving real estate, especially for things like determining basis and selling the property. 

1) This depends. Does the building have multiple units or it is one space? If one space, the percentage of square foot method you describe is fine. If the property is 2 units, you can just divide by two. Common expenses like mortgage int and taxes would be split between your Schedule A and Schedule E, correct. Expenses directly related to the tenant (repair in tenants room, etc.) can be 100% expensed.

2) The appraisal is most likely a better representation of FMV and therefore it is acceptable to use. Don't assign a random percentage-I've seen this before. You need to be able to justify your position.

3) Are you financing this property? There are more options than just adding closing costs to basis. Some costs are required to be amortized over the life of the loan, some might be neither. Ex: Recording fees are added to basis but a credit report fee would be amortized over the life of the loan because it is a fee associated with obtaining the loan. 

Hope this helps. 

Pete Fiannaca Every accountant has seen his or her share of incorrect turbotax returns, and most enjoy fixing them:) In general, I think that real estate warrants the use of a pro. An accountant provides more value than just filling out a tax return correctly- they should be a trusted advisor and help you with planning. Hope this helps!

Tim Heizer Just going to give you a few things I would be thinking about: What did you pay for the property? One of the most valuable tax "breaks" is the section 121 exclusion, which allows you to exclude up to 250k of capital gain if you've lived in the property for 2 out of the past 5 years. If there is a gain, at some point in the near future I'd be looking to sell to take advantage of this. Analyzing the property can be done a variety of different ways, but for the "purchase price" I would definitely use the market value of the property. When the value increases, your return on equity is decreasing. Your original cost wouldn't really be a useful metric. Hope this helps

Carlos Gonzalez Would absolutely recommend looking for a qualified CPA that works with real estate investors. In my opinion, owner occupying a 4plex would be a complex enough situation where it would be well worth it. Keep it mind a good CPA provides the most value by providing tax planning and strategy, only part of it is filling out a tax return correctly (although very important of course). Hope this helps and good luck

Wogderess H. If they have lived in the property for the past 4 years 250k of gain will be excluded.

Eddie T. I love this topic and you made some great points. There just isn't a right or wrong answer because there's just too many factors to consider. For what it's worth,I own in Ridgewood and I love it here. On the other hand, (I'm going to make some assumptions of course) 1.5 hours of wasted time for who people who can afford that kind of rent is extremely valuable from both a financial and personal standpoint-especially when 99% of the people I know who earn enough to do that work significantly longer than 9-5. Think about a lawyer or doctor just because it's a common example . They could bill 30min of extra time a day and probably come out way ahead. A realtor could close one more sale, etc.There's always exceptions of course!