This morning at GMM, Jay Hutto CPA gave a presentation on tax legislation and its affect on Realtors, business, and the real estate market. We have included the presentation here and read some of the highlights below.
Top 7 Tax Tricks for Real Estate Professionals:
- Sale of principal residence
- Real Estate Professional Classification
- Rental of Residences & Vacation Homes (Depreciation)
- Cash Basis Accounting – Income Deferral and Deduction Acceleration
- Capital Gains
- Cost Segregations
- Like-kind exchange transactions
IRS Tests to Determine if You Are a Real-Estate Professional:
- The taxpayer must show that more than one-half of the personal services performed in trades or businesses were performed in real property trades or businesses in which he or she materially participated; and
- The taxpayer must show that he worked more than 750 hours in real property trades or businesses in which he materially participated.
- Residence that is rented for fewer than 15 days during the year: Taxpayer is not entitled to a Schedule E deduction for any expenses associated with the rental of the property, and any income received from the rental use is not taxable.
- Property with (a) personal use that exceeds the greater of 14 days or 10% of rental days and (b) rental use that exceeds 14 days: Deductions (other than interest, taxes, and casualty losses) are limited to the amount of the income from the property.
- Property rented during the year and personal use that does not exceed the greater of 14 days or 10% of rental days: Rental expenses are not limited to the gross rental income of the property, deductions must be allocated to the period of personal use, and property is potentially subject to the hobby loss, passive activity loss, and at-risk limitations.
See more tax tips below: