Ep. 104 Landlord Tales – Tax Credits on Green or Sustainable Property Endeavors

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cost segregation; tax creditsTax Credits

They sound nice, but real estate investors may think that they are not so easy to come by. Those investors who do happen upon them find usually find themselves bogged down by the IRS’ strict stipulations surrounding them.

Tax credits are, in fact, tools set in place to help investors grow their portfolios and while they may seem complex, they are accessible to any investor willing to do a little extra leg work.

While nobody should be expected to know the entire IRS tax code, real estate investors should be aware of some very helpful tax credits that can be applied to their assets.

Michele Pasquale, of Meridian Financial Solutions spoke with us previously about increasing your bottom line through cost segregation.

This week she discusses some more tax credits that real estate investors can apply to green or sustainable property endeavors.

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  • Instated in 2005 Energy Policy Act and renewed annually
  • Potentially set to expire end of 2016
  • Tax deduction for energy efficient additions to commercial buildings +30,000 s/f
  • 3 common components
    • Building envelope
    • HVAC
    • Lighting
  • $0.30-$1.80/SF in tax credits
  • Calculated on energy efficiency of entire building set to ASHRAE requirements

45(l)

  • Residential tax credit for developers of energy efficient buildings
  • Potentially set to expire end of 2016
  • dollar-per-dollar deduction
  • $2000/unit or dwelling
  • Qualifying factors
    • Apartments, Condos, Town homes
    • New construction or rehab up to 4yrs
    • 3 stories tall or less

Disposition

  • Tax credit for removal and retiring of building fixtures or components
  • Book value of components can be written off as business deduction
  • Components can not be purchased within same year as tax year filing with deduction and must be no longer in service

Have more questions on these or other possible tax credits? Call Meridian Financial Solutions for a free quote at 561-252-7282

 

 

Ep. 68 Kevin Walsh, CPA: Proper Structure of Your Property Business Can Save Taxes, Plus New FIRPTA Rules for Foreign Investors

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MIts tax time again. Although filing taxes can be a tedious and frustrating time for many Americans, real estate investors fall into particularly complex categories. Knowing the structure of your property business can save time and money when it comes time to file.

Kevin Walsh, CPA is an expert on all things real estate when it comes to tax structures and filing. A founding member of Atrox Partners accounting services, Kevin has over 15 years experience specializing in real estate, providing consultant services for investment and brokerage firms. This episode, Kevin discusses the importance of structuring your property business to maximize your tax returns. Kevin also discusses big changes coming to foreign investing in U.S. real estate.

Real Estate Filing Structures:

  1. Business of Real Estate
    1. Realtors; Brokers; Industry Servicers
    2. Most favorable tax structure
  2. Investor
    1. Applicable to small and large-scale investors
    2. Subject to loss-limitations ($3000 max)
    3. Capital Gains/Losses advantages and disadvantages
  3. Dealer
    1. Fix-and-Flip deals; high frequency of deals
    2. Gains taxed as ordinary gains; not offered Capital Gains/Losses filing structure
  • Tax Tips for Investors
    • Knowledge is Power – Planning for your taxes is imperative. It is best to consult an expert to ensure the proper tax structure
    • Documentation – Filers need to verify they are filing within the appropriate structure; provide proof of your property business
    • Preparation – Prepare for taxes early…know your filing structure…certain filing limitations begin at close of each tax year

Foreign Investing:

  • Protecting Americans for Taxes Act, 2015 (PAFT)
    • Revisions to previous FIRPTA, outlining terms and stipulations for foreign real estate investors
    • 2 Provisions: 10% sur-tax on foreign investors abolished; 5% allotment for foreign investors now increased to 10%
    • Poised to bring influx of foreign capital into U.S. markets

Contact Kevin:

info@atroxpartners.com

Ep. 62 – This Provision in the Tax Code Might Help You Acquire More Investment Property…..Faster

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home bundles of dollarsMany potential home buyers enter the housing market looking for something they can call “home”. Many look for a property based on personal aesthetics. However, these may not be the best indicators of a good investment property. Buying the ‘dream home’ may require a stringent, long-term financial requirement of the homeowner; one that may limit those who aspire to build an investment property portfolio. By purchasing a property for a primary residence not as long-term commitment but as a strategic investment decision, homeowners can take advantage of a provision in the IRS Tax Code that may enable them to acquire more investment property.

  • 26 U.S. Code § 121 – Exclusion of gain from sale of principal residence
    • Sale of property exempt from gains tax if property was held as principal residence for a minimum of 2 out of 5 years of ownership
    • Single taxpayers entitled up to $250k exemption
    • Joint filing taxpayers entitled up to $500k exemption
    • Mandatory, 2-year residency need not be contiguous
    • Applicable to one sale every two years, no limit on how often this may be done by homeowner
  • Things to Know
    • Look for properties that are good investment decisions
      • Sect. 121 only applies to exemption from Capital Gains Tax, meaning only a property that is being sold for higher than original purchasing price
    • Sect. 121 may not be good for those looking to have children.
    • Money saved in exclusion from gains tax may be used to acquire new properties
  • Exceptions
    • Check with tax adviser or C.P.A. for eligibility; you may still be eligible for partial exemption
    • Sect. 1031 Exchange – enables investors to sell a property with capital gains and receive a deferral on gains tax if purchasing a new one
      • If property was acquired as a replacement property and converted to a primary residence, investor must live in property for 5 yrs before qualifying under Sect. 121
    • Sect. 121 cannot exclude Depreciation Recapture Tax (25%)