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Any realtor recs? Looking to buy in Seattle
Anonymous User
Mutual funds you have your eye on right now?
Visual Storyteller
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Chief
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Any Property Management recs in Seattle area? :(
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Mentor
Marry a realtor or one of you need to become a realtor and file jointly. Great benefits for property owners who are realtors. You can write off most expenses like you can now, except a loss on a property can help offset w2 income filed. Do a cost segregation analysis on one or more properties and boom you’re no taxes.
I can definitely attest to this strategy- I quit my full time job in consulting, started offering my consulting services under my own LLC part time, and purchased a large rental complex (and immediately had a cost segmentation completed) where I easily meet the 750 hour/year IRS requirement to be classified as a “real estate professional”. My wife pays $120k/year in federal taxes in her W2 job, and because of the cost segmentation & accelerated depreciation I not only don’t pay federal or state taxes on the rental property income, we also get about $40k back when we file our taxes jointly. I still pay $50k/year in property taxes on top of the $90k in taxes we pay on earned income, but it could be a lot worse.
Do you have kids? Make them officers of the LLCs that own the properties. Pay them $6k per year (or whatever the Roth IRA limit is), then you invest that money for them in the Roth. Will be an expense for you that will lower your taxes and will keep the money in the family and your kids will be set up nicely.
Even for kids under 10, I know folks who provide 6K for their kids and claim them to be brand models for their website... you can't use them cleaning your props but child model
Why? Then you’d have to pay self-employment tax.
Collect the rents in cash 😈
Subject Expert
How do I pay less taxes?
Why isn’t the government solving mental heath, education, homelessness, drug addiction, border crisis, etc?
US income taxes are very low on a global basis. Just pay what you owe.
Subject Expert
D2 I see that struggle. But it seems like in the US we have this greedy viewpoint that I shouldn’t have to pay more in taxes to help other people. It’s an us vs them thing all the time that my money shouldn’t pay for x thing for that person who didn’t work as hard as me for their whole life. I would like to see a balanced budget but we always vote for the promise of lower taxes which just increases the debt.
Coach
We’re thinking of opening a property management company, but for liability purposes not taxes.
This method you’re not alleviating taxes unless the PM company has additional write offs? Can both LLCs write off the same office space? No idea, but also if you’re the sole member of each LLC, then your taxes are done all together anyway.
I could be way off, working it out as I’m typing 😂
Mentor
D1 has 10 rental properties, a piece of land, and a commercial building thank you. I’ve just been in this long enough to know how attorneys and insurance agencies work. Everyone wants a bite.
Coach
Maybe just pay your taxes and be happy.
COO1 in a perfect world, I would agree, but I don't think everything in the tax code is there to incentivize. I think a lot of the tax code is written to benefit the people who wrote the tax code and the people who donated to the people who wrote the tax code.
This is not enough information. Are all six making profits? Some losses? Everybody above is talking about being able to take the loss. First, assuming they are all passive, all of the passive losses will be offset to the extent of all passive income. So what’s the point of shifting things to a management company? Sounds like more work and money to me. If you’re saying however that you have more losses, then yes, the loss will carryover until you have more passive income to offset it against.
Consider if there is some major capex or improvements you can spend that would return a bit more than what you spend on it. Lower taxes for the year and boost value/equity. Swap carpets to LVP, new light fixtures, etc
Max out 401k, IRA, HSA, backdoor IRA
Subject Expert
CapEx improvements would only affect the Schedule E. Passive losses from schedule E can’t be used against earned income, so CapEx improvements won’t make a dent on the w2 taxes.
Mentor
Talk to a cpa. Farms and real estate are the two most tax favorable industries in America
Interesting question OP. Am not an expert but following for responses. I’m guessing the six investment properties are considered passive income due to you having primary W-2 income therefore you’ve probably got a lot of passive tax losses mainly due to depreciation deductions that keep rolling forward with no impact to your W-2 income. I’m guessing if you could shift some of the expenses to the PM company and assuming it’s considered active income then I suppose you can then start to offset some of your active W-2 income. Although depreciation would be stuck at the investment property level so not sure if it would have meaningful impact except for the minors’ wages deduction other fishes mentioned.
Exactly my situation
You make enough money to pay an accountant, methinks. Taking tax advice from anonymous people on the internet probably isn’t the most advisable course
Yes. I have. Talk to your accountant and make sure you can be listed as a real estate professional so you can take losses that others can’t.
Visual Storyteller
Depreciation and amortization