All Forum Posts by: Taylor Brugna

Rodrigo Medeiros Any chance you'd be able to PM me the name of the bank that was willing do 60%? Thanks

@Cory Iannacone Most CPAs will prefer QBO because we can access your files online in order to make changes, help with bookkeeping, etc. It really depends on your accounting ability/ level of involvement. Some people prefer QB desktop-but they just send me exported P&Ls and Balance sheets and I don't need to make any changes because they have their books in order. If you plan to work closely with your accountant or outsource the bookkeeping (most people should), then I always recommend QBO. 

@Walter Correia Repairs directly made to the rental portion of your property can be deducted on your tax return. Repairs and maintenance to items on the property level like landscaping must be allocated between the rental portion and owner occupied portion. The rental portion is the only portion that's deductible. For mortgage interest, the owner occupied portion would go on schedule a and the rental portion would go on schedule e. Property taxes would be allocated as well. You are required to depreciate the rental portion of your property, and only the owner occupied portion qualifies for the 121 exclusion of capital gains. These are just some of the rules..Talk to a CPA- it is strongly encouraged for a house hacking situation. 

Hope this helps! 

Brenda Whittaker The best way is to keep 1031 exchanging any properties with large capital gains/depreciation recapture tax liability. This will defer the tax, but it won't eliminate it. Passing the properties on to your heirs is the best way to eliminate capital gains tax. Their basis becomes the fmv at the date of death, not your basis. This is why it is generally encouraged to die with properties and not gift them to your heirs. Your heirs will use your basis if gifted, but a stepped up basis if inherited.

Justin Oakes You definitely shouldn't do this, no question about it. I see this all the time in NYC because of the city tax. High income earners "live" in CT or NJ hoping the NYC apartment they are also renting in New York flies under the radar. Residency audits are not fun, and if your income is "not low" you will be on the radar. It's very easy to prove also, consider cell phone records, tolls, etc.

@Josh Teunissen House hacking can be a nice way to generate rental income and help pay the mortgage, while also being able to deduct some of the taxes, maintenance, etc. To answer your questions: 

-You can exclude the owner occupied portion of the capital gains if you've lived in the property for 2 out of the last 5 years. The rental portion will be subject to capital gains and depreciation recapture tax, unless you perform a 1031 exchange to defer your tax liability (great strategy!)

-Repairs related directly to the rental unit can be written off. Things that are for the whole house must be allocated between the rental portion and owner occupied portion. 

-You take depreciation on the portion allocated to the rental unit, correct. 

-The interest is split between schedule A (where you personal mortgage interest goes) and schedule e(where your rental property interest goes)

-Not sure what you mean by is gross rents considered income. Any rental income must be reported as income, then your deductions will be subtracted from the gross rents received

-The tax implications of house hacking are significant and add a bit of complexity to your situation. 

-Most people are a huge fan of house hacking, for good reason. Simply put, tenants are helping pay a mortgage that otherwise you would have to cover entirely on your own if you lived in a single unit (or didn't rent any rooms out). Let a CPA deal with the tax issues-I think the benefits outweigh the added complexity on your tax return :)

Hope this helps!!

@Andrew Kazakoff I'll shoot you a PM, you have a lot going on! 

@Rick Jones For your situation the best way to do it is to allocate the general expenses to each property. It can be a simple excel formula once you have your P&L broken out by property prepared. Are you using quickbooks? If you have 7 classes for each property just make another one called "Overhead". Export the P&L to excel and then allocate overhead accordingly. Don't pick one property-not only for tax purposes but it also impacts your ability to make decisions using the information on your financial statements. 

@Andrew Kazakoff What's the reasoning behind owning in an LLC? Owner occupying in an LLC generally has a lot of downside.

Tomer Shani Most investors don't actually set aside 5-10%, but it needs to be factored it in to your analysis when calculating your return. 6 months of reserves should be fine, hope this helps!