August 22, 2023

The Top Tax Benefits of Owning Rental Property

1 hour 1 minute

In today’s Tax Tuesday episode, tax experts Toby Mathis, Esq., and returning guest Jeff Webb, Esq., CFO of Anderson Business Advisors, discuss several interesting and complicated questions around collecting rent, refinancing your rental home, accountable plan reimbursements, and cost segregation. Submit your tax question to taxtuesday@andersonadvisors.

Highlights/Topics:

"I am single-family home real estate investor… should I collect the rent in a separate checking account LLC” - a property management entity should be collecting and paying the LLCs. Don’t have renters pay directly to the ‘holding’ LLC. The way you’re doing it is okay.

“If you refi a rental home can you start depreciating at the refi amount?” First of all, why would you refi now at 7%? But let’s say you do refi; your depreciation does not start over. Unless you get cash out to improve the home, that remodel depreciation starts anew.

“Thanks for talking so much about S-corps, literally saving my business. If my business doesn’t have enough to reimburse me after the accountable plan” …no, you can’t deduct it if you haven’t been reimbursed. You can give the money to the company, creating a loss, then reimburse.

“How do you determine the quality of a cost seg vendor… does it even matter.” - you need an actual person that stands behind the analysis, don’t just use software.

“What are the tax benefits to writing off the rental property” - you can identify each part that is NOT 27.5 years… you’re supposed to do 5, 7 years, 15 years, for certain home element improvements.

“I made a loan to an individual from my self-directed IRA. He wants to pay it back from a self-directed IRA. will this create a taxable event to either of us? - for you no, for him yes

“I had a property vacant for repairs until April 2023…can I still claim my expenses?” - ‘ordinary and necessary’ can be, yes - roof replacement, repairs, etc. but not ‘improvements’. Put it into service first.

“Can a self-directed IRA co-invest with you and not create a prohibited transaction, even if you self-manage, and may use the assets?” - yes you can set up a joint venture… but you can’t use the asset, you can’t buy a property and ‘use it’ or do any work on it.

“What biz entity can leverage life insurance as an exec bonus plan for tax deduction?” - we can’t think of any way to leverage it, but there are ways to write it off. Talk to somebody who works on exec compensation plans.

“When taking into account bonus depreciation on investment property - how far back and forward in time?” - net operating losses cannot be carried back…only forward, indefinitely.

Send us your questions and check out the event schedule listed in the resources section.

Resources:

Infinity Investing

https://infinityinvesting.com/

Email us at Tax Tuesday

[email protected]

Tax and Asset Protection Events

https://andersonadvisors.com/real-estate-asset-protection-workshop-training/

Anderson Advisors

https://andersonadvisors.com/

Toby Mathis YouTube

https://www.youtube.com/@TobyMathis

Toby Mathis TikTok

https://www.tiktok.com/@tobymathisesq

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