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BillHoo

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Posts: 17
Reply with quote  #1 
Went to a well-known tax chain here in Virginia, VA USA.

I have three properties in two states.  My rent just barely covers the HOA fees, mortgage and taxes.  Random repair costs eat away any profit.

This year, we filed with the state as an LLC with intent to roll up all the properties under one entity for tax purposes.

Between my wife and I, our combined income is over $150K and we got kicked up to the 28 percent tax bracket.

This year, I seem to suddenly get hit with $8,000.00 more in taxes.  (total Fed tax is $12,700) The preparer (a new guy) says that 
- this is from my income on three rental properties
- We can only deduct expenses on one property.
- We need to put in 900 hours of work to get more deductions as a real estate professional.

For three properties combined
Combined rent collected Annually is $60,000
Mortgage and Taxes is $38,400.00
HOA Fees  annually is $18,300
Repairs and maintenance $3,000.00
$700 annual for property insurance
I travel 2200 miles annually to manage the properties and make repairs. $1210 mileage reimbursement
$1800 spent on hotels and meals travelling to property 220 miles away.
LLC filing fee is $175

Does this sound right?  $8000 more in tax due to "rental income" sounds steep.
I suspect he missed something.  It appears he is only filling all this under my personal income tax.  I thought he would be filing this as an S-Corp or something?  He says the LLC only protects me from lawsuit and there is no tax benefit for filing.

I have a fulltime job, but I spend a lot of time responding to tenant requests, managing HOA demands, collecting rent, researching How-To and performing repairs myself,

Does anyone have any thoughts or tips? 

We have not yet finalized because we received $300 dividend income from a stock and he says we need the company's EIN number and won't continue until we get him that information.   We think this is wrong as we never needed an Employer ID number for a stock!

When we see him again, we're going to ask the office manager to check the numbers on his work.

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Bill_H
BillHoo

Registered:
Posts: 17
Reply with quote  #2 
Well, we had someone else in the office do the taxes from scratch and they found a few things the previous guy forgot.

Still on the hook for over $11K in Fed tax though.

The new tax preparer indicated we had to pay the additional tax because my wife's realtor license had expired and we did not file as real estate professionals this year.

As a a result, of that and the additional income we got kicked into the 28 percent tax bracket and no longer could receive the $25K in refund credit for the rental expenses (HOA fees, repairs, taxes, etc.) 

She says that those tax credits would be logged and passed on until we can legally use them... in 20 years!  Or when we sell the property.

I don't understand this?  We'll ask a tax specialist in June after the tax season has quieted down a bit.

My wife doesn't want to take the realtor course again as we have enough stuff to do!

I think we heard somewhere that an option would be to combine the mortgages and put them in a corporate trust?



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Bill_H
jeffinohio

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Posts: 28
Reply with quote  #3 

Get a new tax company. Get a CPA that has rental property to do your taxes. They are giving you bad information. And if you’re spending 3k a year in expenses driving to these properties? Look into hiring a management company to run them or sell them or trade them for closer properties. As far as the LLC tax return goes. It is due Mid-March, not April. I you haven't filed the 1120 or 1120s with the IRS by then, every member of the LLC will be fined like $150 each or some crazy number.

The LLC is normally set up for asset protection (protecting the owners of the LLC).  Income and expenses flow through your 1120 tax return and onto your personal tax return (that's how you probably have it set up for tax purposes)

As far as being a professional goes and getting special right offs. Can’t help you there. I will say you don’t have to be a professional to write of your expenses you incurred managing your property or your LLC property.

BritneyR

Registered:
Posts: 224
Reply with quote  #4 

 I think the tax is much higher than usual.


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