Question: Thinking that I need to buy a rental to off set the income I’ve made this year. I was thinking to buy cash my rental, fix property and take out a loan against the property. Would this help me for tax purposes? Any ideas how this would be structed? I was thinking to do this with a self directed IRA?
Jim Ingersoll: Yes, the depreciation and tax benefits will definitely help you regardless of your financing strategy.
Rocky Vasquez: It’s my understanding that if funded with an IRA it must be an “arms-length” transaction.
Rich Urban: Rental property will get you some tax breaks. Doing it within an IRA will not help though.
Jason Bhattacharya: roth Ira by nature doesn’t off set taxes. However if you set up a SEPP … then it will … but the rules about mixing of funds applies.
Jason Bhattacharya: But most lenders won’t lend against a retirement account unless the LTV is super low… I would say talk to your tax person … I know people with incomes such as you describe and they do similar things…
Xu Sophia Wang: If u need to take tax depreciation, u need to put it to service before end of the year, means u need to hurry to account time for rehab.
Xu Sophia Wang: Using IRA does not give u depreciation though.
Xu Sophia Wang: Get a rental with ur own money or finace. Get the tax benefit this year. Contribute to ur Roth IRA this year, but if u need to do SEP, u need to set up an LLC for ur realtor income.
Jim Ingersoll: If you want help on taxes, set up an LLC to hold the property is my suggestion and ultimaitely begin using land trust for privacy and asset protection. Get the LLC established and a business checking to go with it.
Jason Bhattacharya: Agreed Jim.. I would take it one step farther … meet and pay experts… in real estate and in law… but congrats on the income 🙂
Faisal Qureshi: Jim and Jason, who do you use for taxes?
Jim Ingersoll: I’ll let Jason answer lol insider joke there
Faisal Qureshi: If it’s who I think it is, I know you and Jason don’t use the same accountant!
Jason Bhattacharya: Currently I use competant representation… has not always been the case…. one of the things I did … is bring in a great book keeper (1099) …he and I chat several times a year in regard to tax planning … also he helps lower my cpa bill by having everything organized…. will tell ya… I’m much less stressed…
Chris Smith: I concur with the earlier comments. The IRA route is purely a retirement only tool. If you wish to offset income in 2014, depreciation is your best tool. Even with the changes to section 179, you can take bonus depreciation of 25K. Hopefully the expired tax break will be reinstated after fall elections. This would allow you a major tax break in 2014
Jason Bhattacharya: By the way Chris is the one who got my books straight … after several years of less than good representation… homeboy passed the cpa exam and runs a service friendly accounting service… (chris.. I said it .. now give me my money!!!l. 🙂
Chris Jefferson: Jason Bhattacharya is Chris Smith the info you passed me earlier this year?
Jason Bhattacharya: Yup! He’s still in my office … need I say more??
Rose Ramos: Chris Smith- I was told that if I do not have enough depreciation, I then in turn would have to change my LLC to another entity. Don’t recall if it was Inc. or Corp. come March 2015 based on what I turn in within the next few weeks. So if I do buy a rental under the new LLC and bank account and still using same federal tax I.D the current LLC going to be able to use new LLC with rental as depreciation? Do you know a Mr.Albert Walker as he used to work for IRS and is also who I’ve been referred to?
Rose Ramos: Thank you all for your responses! Have a lot to figure out.
Jim Ingersoll: John Groom Alert lol