Sep 28, 2020
This episode is part 2 of my
conversation with the “black belt” in real estate taxation,
Michael Plaks. If you weren’t able to follow this episode, please
go back and listen to part 1.
Let’s jump right into Michael’s
story and how he saves real
estate investors from excessive taxation.
[00:01 - 05:29] Become a ‘Real estate
Professional.’
- We
both have full-time jobs. Can we commodify real estate
professionals if one of us obtains a realtor license?
-
- How
do we become a real estate professional?
-
- It is
not ‘becoming,’ but a qualification
- Michael talks about Federally licensed Enrolled Agent
(EA)
-
- Designation and representation before the
IRA
- Defended clients in multiple orders were real
estate professional status was challenged by the IRS
- A
real estate professional has to pass a certain
test
-
- They
have to spend more time in real estate than anything else to get
money
[05:30 - 17:14] Rental Property Tax
Deduction
- I
have rental properties, I buy new appliances. Can I deduct the full
cost of appliances right away?
-
- The
answer is Yes, you can deduct it.
- Three
different ways to do it
- What
if you have a rental property, and you had it for three years and
never claimed depreciation. Can I fix this mistake by filing an
amended tax return for the last three years?
-
- The
answer is No
- You
can fix the mistake but not with an amended tax return
- Completely different form and
procedure
- Highly recommend hiring a
professional
- Can I
deduct 100% of the property taxes on my rental property if they are
higher than the new tax law limit of 10,000?
-
- Started in 2018; we have new tax
reform
- As an
investor, you are not limited at all
- It is
only limited for residences, not for investors
- The
answer is yes; you can deduct 100%
- I take my rental property; I get a
mortgage for a rental property to buy a boat. Can I deduct the
interest?
-
- The
answer is No
- Your
interest is deductible based on what you use the loan
for
- It
will only be deductible if you use to buy a new rental property,
but not for personal reasons
- What
if I turn my old house into a rental for two years, then I move
back to live in this house myself for two more years, do I have to
pay taxes when I sell it?
-
- Yes,
you do
- If
you move back into the house, then you still have to pay for tax
when you sell it
- If
you don’t live there three years before you sell it, you can sell
it tax-free
[17:15 - 25:54] Business first, Taxes
Second
- Never
sell or buy anything for tax reasons
-
- Taxes
should never control your decisions
- Don’t
forget the bigger picture; the bigger picture is live your
lifestyle the way you want it, and make money in your
business
- Michael talks about his website
-
- Michael talks about REITax Corp
-
- Specialize in all included
service
- Help
you improve your real estate business
- Help
you in taxes, bookkeeping, IRS problem
- Business advisory, etc
- If
someone has decided to buy a duplex or a quad and they are going to
house hack it, how is the tax on that treated, are they will be
able to deduct for all the units?
-
- House
hacking is not an investment, but a lifestyle for a starter
house
- You
can split your taxes and bills
- But
you can not remove your capital gain taxes
Tweetable Quotes:
“Never sell or buy anything for
tax reasons. Don’t forget the bigger picture, the bigger picture is
live your lifestyle the way you want it, and make money in your
business.” - Michael Plaks
“House hacking is not an
investment, but a lifestyle for a starter house.” - Michael
Plaks
Resources Mentioned:
You can connect with Michael
on Facebook, Youtube, and Linkedin. You can also check out his website at
https://www.michaelplaks.com/
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