Hall CPA PLLC

Landlords: This is a don't-miss episode from Ryan Carriere, CPA & Thomas Castelli, CPA, CFP?joined by Avery Carl, MBA. ??? Listen now: https://lnkd.in/eTRZw8qw

"What is the difference between Schedule E and C taxes?"?? Schedule E is where you report activities earning rental income. Schedule C is where you report activities earning income subject to self-employment taxes (such as a service business, e-comm, flipping real estate, being a real estate agent, etc.). Is AirBnB a Schedule C or E? Most short-term rentals will be reported on Schedule E, not Schedule C. You will report your short-term rental on Schedule C if you are providing substantial services to your guests while they stay at your property (most STR owners don’t do this). Which is better, Schedule C or Schedule E? It’s not about which form is better, but which form is the right place to report your activity. Make sure you work with a sharp team of CPAs to get this right (and avoid an IRS audit). Who is eligible for Schedule E? Landlords who own property producing rental income will report their rentals on Schedule E. What other passive income tax forms do I need to know about? IRS Schedule E and Form 8582 are the two key tax forms you need to be aware of. We think Form 8582 is one of the most important tax forms for landlords to review on an annual basis as it tracks your suspended passive losses. ?? Breaking News: We launched THE Newsletter for Real Estate Investors. Subscribe to the REI Daily newsletter for current real estate news, legislation updates and market analysis: https://lnkd.in/eH_4p-av

3 Safe Harbors Every Landlord Should Know ?? 1. The De Minimis Safe Harbor 2. The Routine Maintenance Safe Harbor 3. The Safe Harbor for Small Taxpayers ??The De Minimis Safe Harbor is found under Reg. Sec. 1.263(a)-1(f). Landlords may use the De Minimis Safe Harbor to deduct up to $2,500 of the costs of tangible property used to produce or acquire rental real estate. This deduction limit is applied at the “invoice” level. Such tangible property includes materials and supplies as well as installation (labor) costs. ??The Routine Maintenance Safe Harbor is found under Reg. Sec. 1.263(a)-3(i). There is no limit on the amount you can deduct under this safe harbor. Routine Maintenance is work the landlord performs on a property to keep the building and each of the building’s systems in operating condition. This generally includes inspecting and cleaning components of the building or structure and then replacing the damaged or worn parts. In order for costs to count under the Routine Maintenance Safe Harbor, you must reasonably expect to perform such maintenance more than once every ten years (i.e. replacing carpet every 4-5 years). ??Found in Reg. Sec. 1.263(a)-3h, the Safe Harbor for Small Landlords allows real estate investors to deduct all of their repairs and maintenance on a property as long as the property’s unadjusted basis is less than $1MM. Also, the total aggregate cost of the repairs, maintenance, and improvements for that property during the year must be less than $10,000 or 2% of the unadjusted basis on the building, whichever is less. Keep more of your rental income with these three safe harbors. ?? Breaking News: We launched THE Newsletter for Real Estate Investors. Subscribe to the REI Daily newsletter for current real estate news, legislation updates and market analysis: https://lnkd.in/eH_4p-av

Real Estate Investor vs. Business Owner and Why it Matters ?? ?? When you invest in real estate, your level of activity will dictate whether you are an investor or a business owner. This distinction matters as if affects the deductions you can take and how passive losses from your rental real estate will ultimately affect you. You are considered an investor in your rental activity if you are not actively participating in management decisions. Investors are generally those investing in real estate syndicates and funds as limited partners. Limited partners typically don’t have voting rights nor do they make management decisions and their level of participation in the activity is usually non-existent. On the other hand, business owners work on their businesses regularly, systematically, and continuously in an effort to earn a profit. You do not have to do the work yourself, meaning you can hire a property manager and be relatively passive in your business yet still qualify as a business owner. Business owners can deduct business expenses whereas investors cannot. If you want to maximize your real estate tax strategy, you will want to actively participate and make management decisions for your real estate activities. ?? Breaking News: We launched THE Newsletter for Real Estate Investors. Subscribe to the REI Daily newsletter for current real estate news, legislation updates and market analysis https://lnkd.in/eH_4p-av

5 Tax Strategies That Will Change the Way You Think About Multifamily ?? Multifamily and commercial real estate offer some of the best tax benefits available. Here are the top 5 strategies: ? Real Estate Professional Status (REPS) Offset rental losses against other income and significantly reduce your tax liability. If you or your spouse qualify, REPS can turn passive losses into powerful tax-saving tools that offset W-2 or business income. ? Cost Segregation Studies Accelerate depreciation to increase cash flow and lower taxes—especially powerful when combined with REPS. By front-loading depreciation, you can generate large non-cash losses that free up capital for reinvestment or portfolio growth. ? Partial Asset Dispositions Write off the remaining value of replaced property components (like roofs or HVAC systems) for additional deductions. This often-overlooked strategy can provide substantial immediate write-offs when you upgrade or improve your properties. ? 1031 Exchanges Defer capital gains taxes by reinvesting in new properties—use the “Swap ‘Til You Drop” strategy to potentially eliminate them. Properly executed, 1031 exchanges allow you to keep your equity working for you instead of handing it over to the IRS. ? Buy, Borrow, Die Access equity tax-free through refinancing, then leverage the step-up in basis to eliminate capital gains taxes for your heirs. This strategy helps investors scale portfolios without triggering taxable events, creating a legacy of tax-advantaged wealth. ?? Breaking News: We launched THE Newsletter for Real Estate Investors. Subscribe to the REI Daily newsletter for current real estate news, legislation updates and market analysis: https://lnkd.in/eH_4p-av

Listen to this week's Tax Smart REI episode with the one and only Rob Abasolo: https://lnkd.in/e6a3c8jz

Most people are doing this wrong. ?? ?? Bookkeeping Join accounting expert, Alex Frazier, for a game-changing webinar TODAY at 4:00 pm ET. If you’re serious about growing a profitable business and avoiding financial disasters, this is one session you cannot afford to miss. ?? Register today: https://lnkd.in/eehipny7

TOMORROW ???? Join accounting expert, Alex Frazier, for a game-changing webinar at 4:00 pm ET. You’ll learn: ? The costly bookkeeping mistakes investors make and how to avoid them ? How to find hidden tax savings and deductions with clean financials ? How rock-solid records can be the key to securing loans and attracting investors ? Proven strategies to keep your books investor-ready and IRS-proof If you’re serious about growing a profitable business and avoiding financial disasters, this is one session you cannot afford to miss. ?? Register today: https://lnkd.in/eehipny7

Top 3 ways high-income earners reduce their effective tax rate ?? ?? Direct Acquisition of Rental Real Estate: Purchasing rental properties allows you to directly benefit from depreciation, property value appreciation, and rental income. By managing and maintaining these properties, you can leverage tax deductions related to property expenses and depreciation, significantly reducing your taxable income. ?? Investing in Real Estate Syndicates or Funds: Real estate syndicates and funds pool money from multiple investors to purchase large properties or property portfolios. These investments can provide substantial tax benefits, such as depreciation and the ability to offset income with passive losses. They also offer the advantage of professional management and diversification. ?? Investing in Asset-Heavy Private Businesses: Investing in private businesses with significant tangible assets, such as car rentals, laundromats, and car washes, can also be tax-efficient. These businesses often have substantial depreciation deductions, which can offset income and reduce taxable profits. Additionally, income from these investments is typically considered passive, further adding to their tax efficiency. ?? Make real estate work for you. Sign up for our FREE REI Daily Newsletter: https://lnkd.in/eH_4p-av

How Do I 1031 Exchange Commercial Properties? One of the core principles of a 1031 exchange is that the new property must be of like-kind to the one you’re selling. But what does “like-kind” mean? For commercial properties, the definition is relatively broad. You can exchange: ??An office building for a retail center ??An industrial warehouse for a multi-family apartment complex ??Land for a commercial office building The IRS defines “like-kind” as any property held for business or investment purposes. So, while you can’t swap your office building for a personal vacation home, almost any income-generating real estate qualifies. Here’s a step-by-step breakdown: 1. Sell Your Property Start by selling your commercial property, making sure to structure the sale as part of a 1031 exchange. This is where a Qualified Intermediary (QI) comes in. The QI holds the sales proceeds to ensure you don’t take possession of the funds, which would disqualify the exchange. 2. Identify Replacement Property (45-Day Rule) You have 45 days from the sale date to identify potential replacement properties. During this period, you can submit a list of up to three properties (or more, depending on specific rules), which you might purchase as part of the exchange. 3. Purchase Replacement Property (180-Day Rule) You must close on the purchase of your replacement property within 180 days of selling your original property. Missing this deadline means losing the tax deferral benefit. 4. Report to the IRS Finally, file IRS Form 8824 with your tax return to officially report the 1031 exchange. Your tax advisor will handle the specifics, ensuring you stay compliant with all IRS requirements. A 1031 exchange doesn’t eliminate your tax obligations, it only defers them. Eventually, when you sell a property without reinvesting in another like-kind property, you’ll need to pay capital gains taxes on the accumulated gains. ?? Understand the intricacies of real estate tax strategy. Subscribe to our FREE REI Daily Newsletter: https://lnkd.in/eH_4p-av