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rated:
tehlorax said:   But say I buy something for $100 with a $100 gift card that I got for $80. I assume my cost basis is $80, but how the hell am I going to remember that when I'm not using round numbers and the purchases could span months? It seems like a nightmare, but again, maybe I'm over-thinking things.
It's a bit tricky. The key word is cost. What you pay for the asset (the discounted gift card in this case) is the basis. What you buy with it and when you do so is the expense and how it's accounted. So, if you bought a $1k card for $800 in 2014 and bought something for $1k in 2014, the basis of that expense (or capital asset) is $800, not $1000.  It's possible to arrange it the other way, in that your expense is $1000, but you will have to realize the $200 gain when the $1000 transaction occurs. 

It's a bit easier for expensed things where the cost of the gift card is expensed and what expensable things you buy with it is irrelevant for the matter at hand.

rated:
rufflesinc said:   
JaxFL said:   Anbody picking up the Lowez Gift Cards at Staplez - 20% off. Far cry from the 40% off HD last year but.... I got $1k worth. Will hit up some other stores tomorrow.
  is this instore? don't see it for e-cards at Staples.com . link??

  In store only.  DId mine in one trans.

rated:
vadeltachi said:   
tehlorax said:   But say I buy something for $100 with a $100 gift card that I got for $80. I assume my cost basis is $80, but how the hell am I going to remember that when I'm not using round numbers and the purchases could span months? It seems like a nightmare, but again, maybe I'm over-thinking things.
It's a bit tricky. The key word is cost. What you pay for the asset (the discounted gift card in this case) is the basis. What you buy with it and when you do so is the expense and how it's accounted. So, if you bought a $1k card for $800 in 2014 and bought something for $1k in 2014, the basis of that expense (or capital asset) is $800, not $1000.  It's possible to arrange it the other way, in that your expense is $1000, but you will have to realize the $200 gain when the $1000 transaction occurs. 

It's a bit easier for expensed things where the cost of the gift card is expensed and what expensable things you buy with it is irrelevant for the matter at hand.

  LOL... you guys...  the govt should spend as much time as you do on these things, not.

rated:
JaxFL said:   
rufflesinc said:   
JaxFL said:   Anbody picking up the Lowez Gift Cards at Staplez - 20% off. Far cry from the 40% off HD last year but.... I got $1k worth. Will hit up some other stores tomorrow.
  is this instore? don't see it for e-cards at Staples.com . link??

  In store only.  DId mine in one trans.

Is there a code that applies to gift cards? all the codes generally exclude gift cards

rated:
JaxFL said:   rufflesinc said:   
JaxFL said:   Anbody picking up the Lowez Gift Cards at Staplez - 20% off. Far cry from the 40% off HD last year but.... I got $1k worth. Will hit up some other stores tomorrow.
  is this instore? don't see it for e-cards at Staples.com . link??

  In store only.  DId mine in one trans.

How long does it last? What. Are the limits?

rated:
^^ Automatically charges $40 for $50 card. Limit i think is supposed to be one, but register will do more. Even though cashier inquired with manager...Mgr said no limit.
I took every card they had.  Think its good thru 6th - look at the ad, but I wouldnt wait to stock up.

Picked up $250 today. They had to look in back for them.  Orig store still out.

rated:
How can I hide/reinvest rental income to reduce taxes?

Earned mid 5 figures in rental income profit (after all deductions) this year. I don't need that money today, I'd rather re-invest it somehow to push paying taxes into the future. Any creative ways for doing this? Can I buy another very expensive property and somehow front-load my mortgage payments so I'm paying $40k/year in interest payments on that property, to offset my current profits? Other ideas?

Edit: I'm not specifically looking for ideas to shield the income I've made this year.  I'm looking for a way to shield the $50k I'll make next year, and the year after, and the next year, etc..

rated:
Bizatch said:   How can I hide/reinvest rental income to reduce taxes?

Earned mid 5 figures in rental income profit (after all deductions) this year. I don't need that money today, I'd rather re-invest it somehow to push paying taxes into the future. Any creative ways for doing this? Can I buy another very expensive property and somehow front-load my mortgage payments so I'm paying $40k/year in interest payments on that property, to offset my current profits? Other ideas?

Edit: I'm not specifically looking for ideas to shield the income I've made this year.  I'm looking for a way to shield the $50k I'll make next year, and the year after, and the next year, etc..

You definitely can't hide if, but you can do some things to increase expenses (new appliances, flooring, painting, furniture, HVAC, etc.) this year and get the Sec. 179 deduction (assuming it gets approved by congress and is signed by POTUS). You can buy another property, to either live in or rent, but it may be a challenge to close on it this year. If you live in an owned house, you can sell it and take the cap gain tax free or convert it to a rental and either move to one of your other rentals (to avoid cap gains on that property) or buy a new place for yourself.

Keep in mind that the RE-related profit you noted is not subject to self-employment tax so you are saving 14 or so percent there.

It may be possible to structure a corporate entity holding your RE assets so that it pays you dividends from those profits. Dividends, for now, are taxed at lower rates than ordinary and real-estate income.  

rated:
vadeltachi said:   Bizatch said:   How can I hide/reinvest rental income to reduce taxes?

Earned mid 5 figures in rental income profit (after all deductions) this year. I don't need that money today, I'd rather re-invest it somehow to push paying taxes into the future. Any creative ways for doing this? Can I buy another very expensive property and somehow front-load my mortgage payments so I'm paying $40k/year in interest payments on that property, to offset my current profits? Other ideas?

Edit: I'm not specifically looking for ideas to shield the income I've made this year.  I'm looking for a way to shield the $50k I'll make next year, and the year after, and the next year, etc..

You definitely can't hide if, but you can do some things to increase expenses (new appliances, flooring, painting, furniture, HVAC, etc.) this year and get the Sec. 179 deduction (assuming it gets approved by congress and is signed by POTUS). You can buy another property, to either live in or rent, but it may be a challenge to close on it this year. If you live in an owned house, you can sell it and take the cap gain tax free or convert it to a rental and either move to one of your other rentals (to avoid cap gains on that property) or buy a new place for yourself.

Keep in mind that the RE-related profit you noted is not subject to self-employment tax so you are saving 14 or so percent there.

It may be possible to structure a corporate entity holding your RE assets so that it pays you dividends from those profits. Dividends, for now, are taxed at lower rates than ordinary and real-estate income.  


You can deduct hvac for section 179? Are you sure?

rated:
rascott said:   
vadeltachi said:   
Bizatch said:   How can I hide/reinvest rental income to reduce taxes?

Earned mid 5 figures in rental income profit (after all deductions) this year. I don't need that money today, I'd rather re-invest it somehow to push paying taxes into the future. Any creative ways for doing this? Can I buy another very expensive property and somehow front-load my mortgage payments so I'm paying $40k/year in interest payments on that property, to offset my current profits? Other ideas?

Edit: I'm not specifically looking for ideas to shield the income I've made this year.  I'm looking for a way to shield the $50k I'll make next year, and the year after, and the next year, etc..

You definitely can't hide if, but you can do some things to increase expenses (new appliances, flooring, painting, furniture, HVAC, etc.) this year and get the Sec. 179 deduction (assuming it gets approved by congress and is signed by POTUS). You can buy another property, to either live in or rent, but it may be a challenge to close on it this year. If you live in an owned house, you can sell it and take the cap gain tax free or convert it to a rental and either move to one of your other rentals (to avoid cap gains on that property) or buy a new place for yourself.

Keep in mind that the RE-related profit you noted is not subject to self-employment tax so you are saving 14 or so percent there.

It may be possible to structure a corporate entity holding your RE assets so that it pays you dividends from those profits. Dividends, for now, are taxed at lower rates than ordinary and real-estate income.  


You can deduct hvac for section 179? Are you sure?

  Not according to his article: http://www.nolo.com/legal-encyclopedia/section-179-expensing-how-rental-property-owners-can-deduct-long-term-asset-costs-in-one-  Unless laws/rules are changing.
 

rated:
philemer1 said:   
rascott said:   
vadeltachi said:   
Bizatch said:   How can I hide/reinvest rental income to reduce taxes?

Earned mid 5 figures in rental income profit (after all deductions) this year. I don't need that money today, I'd rather re-invest it somehow to push paying taxes into the future. Any creative ways for doing this? Can I buy another very expensive property and somehow front-load my mortgage payments so I'm paying $40k/year in interest payments on that property, to offset my current profits? Other ideas?

Edit: I'm not specifically looking for ideas to shield the income I've made this year.  I'm looking for a way to shield the $50k I'll make next year, and the year after, and the next year, etc..

You definitely can't hide if, but you can do some things to increase expenses (new appliances, flooring, painting, furniture, HVAC, etc.) this year and get the Sec. 179 deduction (assuming it gets approved by congress and is signed by POTUS). You can buy another property, to either live in or rent, but it may be a challenge to close on it this year. If you live in an owned house, you can sell it and take the cap gain tax free or convert it to a rental and either move to one of your other rentals (to avoid cap gains on that property) or buy a new place for yourself.

Keep in mind that the RE-related profit you noted is not subject to self-employment tax so you are saving 14 or so percent there.

It may be possible to structure a corporate entity holding your RE assets so that it pays you dividends from those profits. Dividends, for now, are taxed at lower rates than ordinary and real-estate income.  


You can deduct hvac for section 179? Are you sure?

  Not according to his article: http://www.nolo.com/legal-encyclopedia/section-179-expensing-how... Unless laws/rules are changing.

  Bonus, not 179, depreciation allows (allowed) for this. I am not sure if it's yet been renewed for 2014.  FYI:  

  1. The IRS Regulations set forth in T. D. 9636 state that the term ‘building system’ refers to a things that are separate from the building itself, but to which the improvement rules apply. These are: 

    1. The HVAC (heating, ventilation, and air conditioning) system, including motors compressors, boilers, furnace, chillers, pipes, ducts, and radiators.
    2. Plumbing system (including pipes, drains, valves, sinks, bathtubs, toilets, water and sewer collection equipment.
    3. Electrical systems (including wiring, outlets, junction boxes, lighting fixtures, and site utility equipment used to distribute electricity from the property line to and between buildings.
    4. All elevators
    5. Security systems.
    6. All other structural components identified in published guidance in the "Federal Register" or the "Internal Revenue Bulletin"


rated:
how to find out what's the correct value of the property? How to determine if agent/owner is not increasing the price while ignoring current market rate?
looking for property 2013 built, 260K for 2 units. 100% occupancy.. have warranty for few years. 10% management fee. (also, Not sure if 10% management fee is okay for something newly built)
any suggestions are appreciated. thanks in advance. and what do you think


edit:25% down.   ~2200$ rent

Original Que:how to find out what's the correct value of the property? How to determine if agent/owner is not increasing the price while ignoring current market rate?
 

rated:
coolmind said:   how to find out what's the correct value of the property? How to determine if agent/owner is not increasing the price while ignoring current market rate?
looking for property 2013 built, 260K for 2 units. 100% occupancy. warranty for few years. 10% management fee. (also, Not sure if 10% management fee is okay for something newly built)
any suggestions are appreciated. thanks in advance.

  
TO really figure market value you're best off by looking at recently sold and currently listed comparable properties.   Zillow will show comparable properties.

10% management fees are fairly typical.   I have not seen property management vary the fee based on the age of the property.  New doesn't mean maintenance free.  Honestly my nearly new home build a couple years ago has had more things break and fail than our 30 year old rental property.   Plus often the amount of maintenance calls can depend more on the tenants than the property.

 

rated:
Here's another way to shelter using rental properties. I've positioned this as an aggressive strategy before, but now there is supporting IRS guidance:

An IRS office has issued a memorandum clarifying tax law concerning the sale of a house after the owner rents out the house and suffers losses on the rental. The guidance provided in the memo, which cites a hypothetical example, is good news for taxpayers…
Facts: An individual buys a home for $700,000 and lives in it for two years. Then he converts the property to a rental, but the rental income doesn't cover all of his house-related expenses. So as a landlord, he has a loss of $10,000 for each year he rents out the property—the amount by which the expenses exceed the income. Because renting out a house generally is considered a so-called passive activity under the Tax Code, he cannot deduct the losses on his tax return for each of those years. Losses that are not immediately eligible for deductions are temporarily "suspended" and can be used later under the proper circumstances.
After accumulating total losses of $30,000 from his rental, he sells the home for $800,000, realizing a net gain of $100,000 (without taking the losses into account).

Because he owned and used the home as his principal residence for at least two of the five years preceding the sale date, he is eligible to avoid taxes on the profit under a rule that allows an exclusion of up to $250,000 for singles or $500,000 for joint filers. He also deducts the $30,000 of accumulated losses.
The question: Does the fact that he is able to treat his gain on the sale of the home as tax-free bar him from deducting his suspended losses because of a rule that says you can deduct suspended losses only if there is a taxable transaction?

IRS Office of Chief Counsel guidance: The individual is allowed to take all of his suspended losses as a tax deduction and avoid taxes on the gain from the sale of the house. That is because the transaction is potentially taxable, even though the individual does not have to pay taxes because the gain does not exceed the amount that he is allowed to exclude.

Lesson: You can multiply your tax breaks without running afoul of the IRS if you understand and apply tax rules well. In this case, the individual lives in the house long enough and sells it soon enough to be eligible for the tax exclusion and the suspended loss provision. Even if a home owner does not qualify in the same way, he/she might be able to qualify to deduct losses on a rental up to $25,000 a year—a dollar limit fixed by law. To quality for the full deduction, the person's adjusted gross income must not exceed $100,000 (as income rises to $150,000, the $25,000 allowance gradually disappears).
IRS Office of Chief Counsel Memorandum 201428008

rated:
rufflesinc said:   
solarUS said:   
sometimes you need to swap the double-handle shower valves for a single, 

  This . Do this instead of repairing the double or triple handle valves.

I would also put in new water supply lines, new toilet ($100 all in), new sink faucet.

  With our hard water I find the balancing valve locks up every year or two with the single valve.

Out of curiosity have any of you started land lording with a VA home loan on a 4 unit condo (living on one unit).  Any lenders that you recommend?

rated:
What do landlords out there regarding termite and pest control on their properties? I'm in Indiana, and termites aren't a major problem like in the south, but they are still around. I've not been doing any pest control, including my own home. Haven't noticed anything, nor received any complaints from tenants on my rentals.

But was wondering today, maybe i should?

rated:
I only provide pest control when a tenant mentions they would like it.

Call me crazy, but for my own home, I prefer to avoid toxic chemicals being routinely applied.

rated:
I hadn't done pest control until this year. I've started having a few tenants complain about spiders, had one bed bug incident, and a roach issue in another. After paying the exterminator a couple times he offered to spray all the places each spring or fall for $25 each. That's much cheaper than the spot sprays, so I think I'm going to try it for a year or 2. If nothing else I think it makes the tenant feel like I'm trying to stay on top of it. These are apartments though where I feel it's worth it to not have an infestation spread. I won't be doing my SFH.

For termites I usually inspect at purchase and if there are live ones I'll have it treated with I think Termidor. He says he's yet to have a recurrence on a property he's treated with it and he's been in business for 15+ years. He charges $75 to inspect prior to purchase and if he sprays he takes that off. Most of the time he finds old damage but doesn't recommend treating it. I try to walk the ones I haven't treated from time to time and just keep an eye out on the mulch outside and up the concrete foundation walls for their runs. If I see any new activity I'll have him look at it again. I don't know if that's right or wrong but so far I haven't had any issues.

rated:
Bizatch said:   I only provide pest control when a tenant mentions they would like it.

Call me crazy, but for my own home, I prefer to avoid toxic chemicals being routinely applied.

  Ditto here. I do carry termite policies for all the properties though.

rated:
Reducing Taxes:

I've read various things and need a little help understanding.

Basically, I own several rentals and earn let's say $45k this year net profit. I don't want to pay tax on the $45k. I don't want to touch the $45k. Instead, I want to keep the $45k in the business and eventually use it to buy another piece of property.

Can I form a corporation, and simply keep the $45k inside the corporation, do this multiple years, until I have $250k saved inside the corporation, and use that money to pay cash for another property.

If I did this, what would my taxes be? I *think* I would pay 15% corporate income tax on the $45k on the year it was earned, and then pay NO further tax on it as long as I keep my total retained earnings to less than $250k.

Is this right? TIA

rated:
Bizatch said:   Reducing Taxes:

I've read various things and need a little help understanding.

Basically, I own several rentals and earn let's say $45k this year net profit. I don't want to pay tax on the $45k. I don't want to touch the $45k. Instead, I want to keep the $45k in the business and eventually use it to buy another piece of property.

Can I form a corporation, and simply keep the $45k inside the corporation, do this multiple years, until I have $250k saved inside the corporation, and use that money to pay cash for another property.

If I did this, what would my taxes be? I *think* I would pay 15% corporate income tax on the $45k on the year it was earned, and then pay NO further tax on it as long as I keep my total retained earnings to less than $250k.

Is this right? TIA

seems like in order to not be a shell corporation, the properties would have to belong to the corp in order to take/shield the income like that....so you're talking about transfer costs and risks, 2 tax returns and the associated fees, etc.

is the 45k before depreciation? if so, you're already offsetting some of that income using depreciation...likely not a small amount.

the current tax code actually favors the appreciation-minded investor (who makes $ on the sale and only pays long-term cap gains), not the cash flow investor (who pays higher taxes on the regular yearly income)...especially if the appreciation investor is willing to move every couple years

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