In this episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., address several listener questions on a variety of tax topics. They cover the tax implications of selling stocks to purchase rental properties, explaining capital gains strategies and depreciation options. The duo discusses using LLCs and management corporations for rental properties, including how property management fees can generate tax-free income. They explore inheritance tax considerations for 401(k)s, the benefits of short-term rentals for generating tax losses, and the implications of moving back into a rental property. Other topics include setting reasonable salaries for S-Corporation owners, maximizing depreciation to offset W2 income, claiming natural disaster losses, depreciating remodel costs for rental properties, and properly implementing the 280A/Augusta Rule for tax-free home rentals.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:
- "I would like to sell my stocks and use the money to help purchase a rental property. Is there a strategy to minimize or avoid paying taxes on capital gains or any other tax-saving advice?" - Loss harvesting and short-term rental tax benefits.
- "Would a rental property not in an LLC also be reported under the Management Corporation or a 1040?" - Report rental on 1040, management fee on 1120.
- "What would the tax implication be when a spouse passes and the surviving spouse inherits a 401k?" - Lump sum, continue distributions, or rollover options.
- "What would be the tax consequences concerning W2 income, depreciation, etc., of purchasing a rental property, using it as a short-term rental with material participation in the tax year that it was purchased, then selling it the following tax year?" - First-year losses, later depreciation recapture on sale.
- "What are the tax implications if I've moved back into my rental and use it as my primary residence? I'm not planning on selling anytime soon." - Reduced Section 121 exclusion, depreciation recapture later.
- "What is a reasonable salary range we should set for ourselves to remain compliant but still maximize our S Corporation Tax savings?" - 30-60% of net business income typically.
- "If a person is a W2 wage earner and wants to start real estate as a side job, what needs to be true when picking real estate options to maximize asset depreciation to help offset my W2 taxes owed?" - Short-term rentals with material participation (100+ hours).
- "If I experienced a loss from a flood that was declared a natural disaster in 2024, how do I take that credit on my taxes?" - Personal: federal declaration required. Business: none needed.
- "How do you depreciate remodel costs for an income property? So, a rental property. You purchased the property, for example, 10 years ago for 100k, and began depreciating it. This year, you put 30K into a remodel that included floors, paint, kitchen cabinets, and appliances." - Separate depreciation schedules for each improvement type.
- "I'm interested in using the 280A/Augusta rule rental of my home for an upcoming seminar that I'll be attending online. Am I allowed to use this strategy since I'm the only one attending? Also, I reviewed the document that Anderson put together for the 280A. It mentions getting three quotes. If I call a hotel and ask for a conference room quote for one person, I imagine I won't be taken seriously. Do you just request a small conference room for five people or less?" - One-person meetings allowed; request quotes for small groups.
Resources:
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