Real Estate Show Anna Hamilton CPA with Jones and Roth
Real Estate Show Anna Hamilton CPA with Jones and Roth
Full Video Transcript Below
[00:00:00] Alice Lema: Well, hello, Southern Oregon. And welcome back to the real estate show. I'm Alice Lema. I'm a broker here in beautiful Southern Oregon with John L. Scott real estate. So happy you could join us again today. We have a really great show for you. We're to be interviewing anna Hamilton from Jones and Roth CPA.
[00:00:20] Anna is one of my favorite people. Not only is she a great tax person, but she specializes in small business and real estate. And so I'm so happy she agreed to come on the show today. We're hoping to hear about investing, tax deductions, real estate in general. Small business taxes in general. It should be a really, really great show.
[00:00:41] Hope that you can stay with us to talk to Anna Hamilton, Jones and Roth CPA. Before we jump into that, want to give a quick overview of what happened this week? Take deep breath. It was a bumpy week, wasn't it folks. Oh my gosh. Just watching the stock market. It just went down. It went down hard and it went down fast and a lot of people are nervous because of that.
[00:01:03] And they're talking about the R word, what's the R word, the recession, the recession word. So I'm not saying there's going to be recession. I'm not saying there is recession. I'm just saying it's what everybody's talking about. So everybody, let's go to the data. You can go online and you can see that a recession does not automatically equal a housing crisis.
[00:01:27] Now having said that, that excludes, of course, the housing crash, the housing recession itself. 2007, 2008, depending on what part of the country you were in is when it hits ya. Except for that, for the most part housing does okay. It either has a very small decline or it actually for the most in recessions housing still appreciates anywhere from 3% to 6% on average.
[00:01:54] So just want to remind everybody, take a deep breath. I know it was hard to watch all the stuff that happened this week, but check it out. Quite frankly, if we're looking at the future, regardless of what happens, especially here in Southern Oregon, we should do okay with our housing because you know what, it's still about supply and demand, and we still have more buyers than sellers.
[00:02:17] We're getting more inventory. It's not as easy to sell houses. It's not as quick as it was a year ago, but it's still happening. People still want to move. All right. So deep breath, don't panic, and also stay tuned for our interview with Anna Hamilton, Jones and Roth CPAs. It's going to be great. You're going to feel better.
[00:02:36] You're also going to get some really juicy tips about how to deal with your taxes, your real estate and your small business. We're going to take a quick break now. Want to say thank you to our sponsors, John L. Scott, Ashland and Medford, the rogue valley association realtors here in Medford and also Guy Giles of Churchill mortgage. We'll be right back.
[00:02:56] Well, good morning, Southern Oregon. And welcome back to the real estate show. I'm Alice Lema. I'm a broker here in beautiful Southern Oregon with John L. Scott real estate. And today we are so excited to have my favorite accountant CPA person, Anna Hamilton on the show with us. Hi Anna.
[00:03:14] Anna Hamilton: Hi, it's good to meet here.
[00:03:17] Alice Lema: Yeah. Thank you so much for doing this, you know, real estate and accounting and taxes is something we talk about all the time. Can you tell us a little bit about yourself and your company?
[00:03:27] Anna Hamilton: Yeah. I've been a practicing accountant and CPA for about five years now. I'm located in Eugene and I specialize in helping small businesses get off the ground running and running their own show. And I also specialize in estate and trust work, and I just love watching local business owners succeed with the tools that I can help them with.
[00:03:51] Alice Lema: So a small business specialist, we just don't have very many CPA people that do that. That's fabulous.
[00:03:58] Anna Hamilton: Yeah. I like to be pretty involved in the startup of helping people get onboarded with their bookkeeping software and helping them go through the quarterly process of reconciling and making sure that they know exactly where they stand financially. I know it's such a hard time when you're not familiar with anything, so it's nice to have someone to be by your side.
[00:04:22] Alice Lema: Yes. Yes. And plus it keeps us out of trouble. So why don't you give your whole firm name?
[00:04:29] Anna Hamilton: Yeah, I'm with Jones and Roth CPAs and business advisors or in Eugene. And we also have locations in Bend and Hillsborough.
[00:04:40] Alice Lema: Fantastic. And we found you online because as small businesses grow and get more complicated, you sometimes need a bigger firm. And that's how I found you. And I'm just so excited that you're helping us now, but also wanted to bring some of your expertise to our radio , especially now we're kind of mid year. Let's talk a little bit about the tax environment in 2022 for small businesses. What is it like to be a small business post COVID here in Oregon.
[00:05:16] Anna Hamilton: Well, luckily it doesn't seem like they're changing tax laws significantly like they have in the past three years. So I would say for small businesses, is this a good time to really get educated by your CPAs that have seen all of these changes and gotten them incorporated in their day to day.
[00:05:34] There's not going to be a whole lot of surprises that I'm anticipating tax-wise. But other than that, there aren't big changes I'm seeing.
[00:05:44] Alice Lema: Well, and that hardly ever happens for us. So when it comes to real estate, we have people, a lot of people have some very common misconceptions. And one of the ones I keep running into that I'm hoping you can clarify is this idea of living in your personal residence for a couple of years or not?
[00:06:04] You know, and then selling it and then kind of what happens to how, how the IRS looks at.
[00:06:11] Anna Hamilton: So the IRS wants people to be homeowners and invest in real estate for themselves. It helps the economy. So they've made these rules that you can have an excludable gain on your personal residence. And what that means is if you lived in that home for two of the last five years, it's considered your personal residence. And you're eligible to not pay capital gains tax on that.
[00:06:42] And what capital gains is, is basically what you sell your home for, less the cost of your home. So whatever you bought your home for. And so, whatever the difference is between those, it would be subject to capital gains. But as a homeowner, you are eligible to exclude $250,000 of gains per person. So for a married couple filing jointly that's $500,000 that you don't have to pay capital gains tax on. So you can reinvest in real estate. That's the whole point is the IRS wants you to reinvest those funds and move up in your personal residence.
[00:07:25] Alice Lema: So does that mean that if you don't live in the house for two years, oh, the last five that you would pay the IRS on the profit. Is that what you're saying? Okay. Okay. And then if you do live in it the two years out of five, which is actually great, that's, that's more flexible than it just has to be two years. Then what happens if you do the exclusion? Like how many times can you do that exclusion that 250,000.
[00:07:59] Anna Hamilton: I haven't seen, usually people aren't selling their personal residence, like every four or five years.
[00:08:07] Alice Lema: Well, we try to, but then the COVID locked us down. So, how does that work? Let's say, cause I had some millennial folks, so like 27, they bought right before the shutdown. And then they had only been in the house 18 months and they were really worried about paying capital gains. So would that have been a moment to use that exclusion?
[00:08:32] Anna Hamilton: So since they weren't there for the full 24 months, They would be subject to capital gains tax, but assuming how much has the market gone up in that 18 months? You know, like what did they buy it for? What were they selling it for right?
[00:08:49] Alice Lema: They made $67,000 in 18 months.
[00:08:53] Yeah. So they would have to pay taxes on that. Accidentally. Yeah, they made that much money.. So how do you, how does the IRS decide how much taxes you're going to pay in that scenario?
[00:09:05] Anna Hamilton: So capital gains tax is a little bit different than just regular taxes. The rates vary from 0% to 25% and it's based on your income level.
[00:09:17] So the higher your income level is, you'll be in the higher range of percentage. So if you don't make very much money, there are times where you won't pay any capital gains tax.
[00:09:29] Alice Lema: Oh, interesting. Even though you have a gain. That's super cool. So when people are cashing out of their rentals, for example, does that same, so that's not their primary residence. Is that treated the same or is that different?
[00:09:49] Anna Hamilton: It's completely different.
[00:09:51] Alice Lema: Okay. Well, let's talk about that.
[00:09:53] Anna Hamilton: Selling a rental it's it's an investment property and usually rentals have been depreciated. So that complicates things, but we can talk about that later. But selling a rental, you would be subject to either capital gains tax, or if you're a real estate professional, this is your ordinary course of business, you're eligible to claim it as ordinary income.
[00:10:19] Alice Lema: Wow. So if you're in the business of real estate, you're treated better is that what you are saying?
[00:10:27] Anna Hamilton: They're very fair, fair treating to real estate agents and real estate professionals. They have some strict guidelines as what a real estate professional looks like. You can look it up on the IRS website. But the benefit of being real estate professional is that this is your primary business and everything is considered ordinary income rather than passive income.
[00:10:53] Alice Lema: Wow.
[00:10:53] Anna Hamilton: That may not mean much to a lot of people, what does passive income mean? Passive income can only be, You can only deduct passive losses up to your passive income. So if you have a rental and have these significant losses, but you're just a general Joe Schmoe, just renting out this house for fun outside of your job, you can't deduct more than $3,000 a year because this is a passive activity in your line of work.
[00:11:24] But if you are a real estate agent working 750 hours or more selling real estate, day-to-day, operating multiple rentals. It's considered ordinary income that can ofset any other losses that you may earn.
[00:11:40] Alice Lema: Wow. Wow. That's very generous. So I wonder if some of our more active investors should consider becoming a real estate agent so that they can have that tax advantage. That's kind of interesting.
[00:11:56] Anna Hamilton: Yeah, and real estate agents, really, if you're in that profession, you know, all the ins and outs of getting the properties, paying a lower commission, cause you're the real estate agent. You can even be a real estate professional without being a real estate agent. I would recommend just looking on the IRS website at what those qualifiers are, and you can talk to your CPA about it. But you don't necessarily need to be a real estate agent to be a real estate professional.
[00:12:25] Alice Lema: Oh, let's talk about that.
[00:12:29] Anna Hamilton: So I've seen you need to be material materially participating in the business and being actively involved in the rental, you know, managing it. Doing repairs or sending out the repair people spending at least 750 hours a year, dabbling in this. You know, buying real estate, managing real estate, doing the bookkeeping, whatever you can do to have that be like an active business on your part.
[00:13:02] Alice Lema: Well, well, 750 hours a year is actually not that much.
[00:13:07] Anna Hamilton: Yeah. And if we had multiple rentals, it probably wouldn't be that hard to get.
[00:13:11] Alice Lema: I was going to say, yeah, if you're a landlord in Oregon, you're already spending that much time. Just, just learning the new laws every 10 seconds, for sure. So, well, that's super, super cool.
[00:13:25] So going back to the capital gains situation, some people are using that live in, two years of five years living in your primary house two years of five years. So you could rent it out for three years.
[00:13:41] Anna Hamilton: Yes. And I have seen this before. It does complicate things a little bit because when you're renting it out, you're depreciating it. And what depreciating it means is you're taking an annual expense every year based on the years that the IRS deems it can be used. So in the case of rental, it's 27 and a half years. So whatever the purchase price over 27 and a half years, you're deducting that. But when you sell it, any expense you took is going to reduce your cost basis in that property.
[00:14:14] So you're going to have a, a gain on whatever's considered the rental portion, and then whatever's considered your personal residence is eligible for the exclusion.
[00:14:25] Alice Lema: Wow. That's very sweet.
[00:14:27] Anna Hamilton: Yeah. Anything that has depreciation on it. You're going to have to recapture that depreciation you've taken as income. So if you have a $300,000 house is depreciated over, say 30 years, you only rent it out for two years. Whatever that two years of depreciation is, that's going to be your income.
[00:14:51] Alice Lema: Okay. Okay. Well, it helps to have a really smart CPA person like Anna Hamilton of Jones and Roth, helping you with all these things. And again, want to say thank you for being on the show today. We've got lots, lots more questions. We're going to be talking about more depreciation, what expenses you can deduct from your rentals, your homes. We might even have time to talk about vacation rental business. Awesome. So don't touch that dial.
[00:15:20] We'll be right back with a quick word from our sponsors, talking to Anna Hamilton of Jones and Roth CPA. We're brought to you by Guy Giles of Churchill mortgage, John L. Scott, Ashland and Medford, and our local rogue valley association of realtors. Want to say thank you to all of our sponsors. We just love that you help us put the show on every week and we'll be right back. Don't touch that dial..
[00:15:46] Well, good morning. Again, everybody. Alice Lema here, broker John L. Scott. Welcome back to the real estate show. We have one of my favorite people, Anna Hamilton of Jones and Ross CPA out of Eugene. She's on the show today, helping us understand what's going on with taxes, houses, money, depreciation, anything you could think of.
[00:16:07] Welcome back, Anna. So in the last segment, we were just starting to talk a little bit about depreciation and how that can help people that have investment properties. And then you mentioned 27 and a half years. What happens at the end of the 27 and a half years? If, if the asset's been fully depreciated, what do you do next?
[00:16:33] Anna Hamilton: So after the, the full 27 and a half years, the rental property has been depreciated slowly bringing down that cost basis remaining in it. You're not going to get an annual depreciation expense anymore. You've taken all that you can. But what it will do is when you sell it increases the proceeds because the cost basis has been fully depreciated and taken. So if you want to hold onto the rental, you wouldn't have to have any proceeds on the sale, but you also wouldn't get any more depreciation expense.
[00:17:11] Alice Lema: So I have a lot of landlords that do want to sell right around that 26, 27 year mark, is that why? Because they just don't want, they want to start over with something new.
[00:17:24] Anna Hamilton: It could be, I mean, it could be a personal preference. I mean you can always improve a property and add to the depreciable basis. Or you can get the gain and get a higher price rental or buy two separate rentals. You know, it depends on what you want your real estate business to look like.
[00:17:47] Alice Lema: So one of the things we didn't touch on yet was what happens if these assets are passed on to another person in their family? Does the depreciation I'm assuming, does that it doesn't start over again. They have to maintain it the way the schedule was originally. I don't think that's the case.
[00:18:09] Anna Hamilton: You would get the basis of what that person had in there. And then yeah, it would be transferred to you and be depreciated just the way it was. If somebody dies, they let you do this step up in basis to date of death value, and then you can inherit it and get it at a brand new price.
[00:18:34] Alice Lema: Why don't you talk a little bit more about how that works? Because I think people would be very interested to know that.
[00:18:39] Anna Hamilton: So right now, as long as tax law, doesn't change about estates and inheritance when someone passes away and they have a lot of assets, they get valued at the date of death value. The best way to do that is to get an appraised value when someone passes. Sometimes it's required because you need to file an estate tax return.
[00:19:00] I see a lot of those in Oregon where they have to value the entire estate and then they get taxed on it. But the beneficiaries get the assets that are left to them in the will or a trust, at the value it was when that decedent and passed away. So if they bought a house for a hundred thousand years ago and it's worth 900,000 today, that beneficiary just kind of got a $900,000 asset Tax-free.
[00:19:32] Alice Lema: Wow. Even in Oregon, Oregon. We love Oregon, but it does have its financial challenges for sure. So are there any other estate or kind of death tax scenarios that people might not know about?
[00:19:50] Anna Hamilton: Oh, I'm sure there's many things. There's so many little caveats. But I think that the main takeaway is that there's that step up at passing and then there's an inheritance, inheritance tax paid by the decedent's estate.
[00:20:06] And then everything given to the beneficiaries just goes to them like a house wouldn't have tax due. But if they inherited an IRA or a retirement account it would be taxed as if they had their own retirement account or IRA. So there are some better assets to receive when someone passes away.
[00:20:25] Alice Lema: Well, that's interesting. So, you know, a lot of us, when we're doing our end of life plans, we automatically think of going to an attorney, but I bet a lot of people don't think of going and talking to a CPA like yourself. Yeah, yeah. To get some of that lined up, because it could change things.
[00:20:42] Anna Hamilton: Yeah, and it's really great to start working with an attorney and then having a CPA alongside the planning process.
[00:20:49] Just so it's so seamless and it doesn't leave a burden on your family in the end days. I know it's really hard for people to even want to think about money in those times.
[00:20:59] Alice Lema: Yeah, it is. Yeah. It's, it's tough. Especially even if you knew somebody was going to pass, it's still, it's still a lot to juggle at the end. So we definitely want to encourage people.
[00:21:10] I just never thought about a estate planning with a CPA. So I guess I'll, I'll be calling you because I've got all my stuff done on the legal side, but not on this side. Yeah. Yeah. I didn't even realize that was a thing. So any folks that are listening, you might want to call. Somebody like Anna Hamilton of Jones and Roth CPA. If you have your legal stuff done, but you don't have your financial stuff done.
[00:21:35] So moving right along. So it was something more, more positive. What about deducting expenses on real estate? When can you, and when can you not, how does that all work?
[00:21:47] Anna Hamilton: Well, if you're a big real estate person, you could have a lot of expenses and consider yourself meeting a more advanced accounting software. There's two ways you can track this it's cash basis or accrual basis. Cash basis means cash out. You just record the expense. Income in deposit in the bank, but accrual would be when whenever it's earned before it's even deposited, you would record it. That's usually what the bigger businesses do have a ton of rentals.
[00:22:22] They want to accrue it when it's earned rather than when it's received. But I think most renters are in that small cash basis category. So cash out means expense. And as far as expenses go. You would want to deduct anything that has to do with repairing and maintaining the rental, property taxes, insurance anything as far as like improvements on the rental, I would capitalize anything that adds value to the property and costs more than $2,500.
[00:22:56] So if you bought like an HVAC. You would want to put that on your asset schedule and depreciate it over the life that the IRS allows it to be, which would be 27 and a half years. So you don't get into that at all in the same year, but that's just the way it is. But most things that you get, machinery and equipment that costs less than $2,500. Those have a smaller, useful life. And right now they're eligible for a hundred percent bonus depreciation. The IRS just wants you to categorize it as a capitalized asset that gets depreciated.
[00:23:34] Alice Lema: Wow. Wow. So going back to your example of the HVAC, a lot of those don't even last 27 and a half years? No, no, no.
[00:23:44] Yeah. So would that be repairs and equipment that are considered kind of mandatory maintenance or improvement, or would it also qualify for more of the optional improvement? Like solar.
[00:23:58] Anna Hamilton: So anything that's considered like structural or it needs to be like screwed down to the building. They're considering that 27, 7 and a half year property, because it goes with the building when you sell it.
[00:24:14] So it since it has a higher value it's structural, like it's part of the home. You're not going to take it when you go, it's going to be capitalized at that.
[00:24:26] Alice Lema: Okay. So if you put something on like a solar system, it is attached and you leave it, you don't take, as I know people talk about, well, I'm going to take that with me. So if you leave it, then you can do that depreciation as a homeowner, is that what you're saying?
[00:24:42] Anna Hamilton: Oh, as a rental, as all on an investment property. Yeah. Okay. As a homeowner, there are lots of state credits and federal credits available to you for solar. I'm not familiar with all of them, but a lot of times when you buy those solar kits, they give you a little packet saying all the credits you're eligible for on your personal tax return.
[00:25:03] Alice Lema: Okay. And so is that in the year that you purchased it or is that spread out over time in the year that you purchased it? Okay. Cause those are, those are pricey. They're pretty big credits on that.
[00:25:16] Anna Hamilton: And then if it's your personal residence, I would track that and add it to the basis of your home. Cause it did improve your home and if you sell your home and it has those with it, it will reduce the capital gain or the ordinary income associated with that.
[00:25:34] Alice Lema: Okay. Well, that's really good to know. So with that follow along that, on your personal residence. So we're talking about personal residences right now and taxes on your personal residence, if you have a new roof, a new septic.
[00:25:47] Anna Hamilton: Yeah, you would want to be tracking that sort of stuff if you're planning on selling your home in the future.
[00:25:53] Alice Lema: Well, everybody moves out of their house one way or the other at some point, you know, for a variety of reasons, the asset is always going to change hands. So it just sounds like people should be keeping track of all their improvements and repairs regardless.
[00:26:09] Anna Hamilton: And I mean, if you don't anticipate having a huge gain, as we talked about the $500,000 of excused excludable gain for married filing joint. It could be not worth it to track those expenses, but you never know if you're going to have a big gain on the home. So may as well just track all the money you've put in.
[00:26:30] Alice Lema: Yep. I think that's excellent advice. You know what we've seen just from the shutdown, the huge, I guess what we would call now inflation, appreciation that we saw in Southern Oregon housing.
[00:26:43] That was completely unexpected for sure. So, well, that's really interesting. So if you have investment property, And you are putting in maintenance, repairs improvements, that all makes sense that if you track it, but I was surprised to hear that you can deduct your improvements on a regular primary residence at the time of sale. You can use that.
[00:27:12] Anna Hamilton: It's considered your cost basis in the home. So anything that you've put into your home that added value, it should add to the, what you paid for that home, but that could be tens of thousands of dollars if somebody owns their house for 15 or 20 years.
[00:27:28] Yeah. Like, I mean, I remodeled my kitchen last year and spent $20,000. Like I'm considering that part of my cost basis. If I sell it.
[00:27:38] Alice Lema: Did you keep all the receipts? She did. Sorry. There's a little CPA humor there. So the the other category I wanted to ask about deductions was what if it was a short-term rental? Does that make any difference? If it's an Airbnb versus a regular rental property?
[00:28:01] Anna Hamilton: It only makes a difference if you're a general person that's passive in the activity versus a real estate professional, just a general person that doesn't have a real estate professional kind of classification, would get taxed at a short-term capital gain rate, which at this time it's your ordinary income which is higher than capital gains rates for long-term.
[00:28:33] Alice Lema: So we're going to have to take a quick break. We're talking to Anna Hamilton of Jones and Ross CPA. We'll be right back and we'll talk more about deducting or not deducting your Airbnb.
[00:28:43] Well, hello again, everybody. Welcome back to the real estate show. We're talking today to Anna Hamilton. One of my favorite CPA she's with Jones and Roth up in Eugene. Thank you for being on the show. You got it. And we were right before the break, we were just starting to talk about Airbnb investments and what you can and cannot deduct. And that was a really interesting comment you made about having to do with the personal time versus the I guess the rental time, the guests time. Yeah. How does that all work?
[00:29:13] Anna Hamilton: So it does take a little bit more sort of bookkeeping and busy work to have a rental that's an Airbnb that you also use yourself. The IRS wants you to determine your personal use days on the rental. They don't want you taking any more expenses than you're allowed to, of course, but basically we would find your personal use percentage, which would be number of days you used it personally over the full year. And it would limit the amount of depreciation that you could take by the personal use percentage. So. It's kind of a simple calculation, but it does take a little tracking on your part.
[00:29:54] Alice Lema: How do they, how do you, how do you convince the IRS? Which days are yours and which days are not, how do you do that? Because that's the question. I know the IRS is not very trusting.
[00:30:08] Anna Hamilton: Yeah. They'd probably look at your like Airbnb records and your VRBO stuff to see what's going on. But other than that, Probably a lot of the honesty policy. Yeah.
[00:30:18] Alice Lema: You gotta be able to prove to them, somebody else was there or not. So if you're buying a condo in Hawaii and you're going to use it yourself, sometimes you better track all that carefully.
[00:30:30] Anna Hamilton: Yeah, for sure.
[00:30:31] Alice Lema: So what about home offices? Home offices? How does that get done on your taxes?
[00:30:41] Anna Hamilton: Well, it depends on the type of business you are. A lot of times I see home offices for small family owned businesses that don't have their own business tax return. They are filed on their individual form 10 40, it's called a schedule C business.
[00:30:58] And you basically can deduct your home office expenses up to the percentage of your home that takes up the home office. So if your home is 3000 square feet, you have a 300 square foot home office. That's pretty big, but the percentage of home office expense, you can multiply that by all your expenses you incur for maintaining your home. So it would be your electricity, your internet bill, any maintenance you put on the home.
[00:31:32] Alice Lema: So if you roof, while you have a, I mean, can you smidge off a percentage of that?
[00:31:39] Anna Hamilton: Yeah, it would be the percentage that's related to the home office.
[00:31:43] Alice Lema: Well, that's cool. Put in a new swimming pool that relates to home office, but just had to ask. So probably not a new barbecue either then. Okay. Well, Anna, let's talk a little bit now about taking investment property and rolling it into something else. There's a process the IRS has for that, that helps with your taxes. Let's talk about that next. Okay.
[00:32:12] Anna Hamilton: So what I'm thinking is they're called 10 31 exchanges. It used to be allowed for all sorts of type of like kind property. But right now it's limited to real property. You can do an exchange of real property for real property. Which means if you have a rental that's increased in value and you want to use that value to invest in a different property, you can sell it and exchange it for another one.
[00:32:43] With while working with a real estate agent and a title company, you have to have special forms to be able to do a 10 31 exchange. But what this does is defer that gain until you sell that second property that you just got. So the basis of the second property you got is smaller because you rolled in that other property into it, but defer the gain so it decreased that basis of the new property.
[00:33:12] It can get confusing if you do it a lot. I've seen people that do it a lot, but at the end of multiple exchanges, you're going to see an asset that's very small. So if you exchanged five times, It's deferring that gain for each one, you sell and shrinking the basis that, of that new property that you replaced it with. So whenever you do sell you're gonna feel that tax effect.
[00:33:38] Alice Lema: Well, so in a lifetime, there could be quite a few exchanges.
[00:33:42] Anna Hamilton: Yeah. And I've seen people do this as like an estate plan they plan on keep rolling it forward and then they're going to have their beneficiaries inherited and they don't ever sell it.
[00:33:58] Alice Lema: Wow. So if you never sell it, then you never have to pay the Piper that one time. Is that what you're saying?
[00:34:06] Anna Hamilton: Yep.
[00:34:07] Alice Lema: Wow. So it used to be that you could, like you, you said in the beginning, we used to be able to roll rental probably into an airplane or a boat or something like that. Are you saying you can't.
[00:34:18] Anna Hamilton: It has to be similar in use. So no, it has to be property for property, real estate for real estate. Before you could do a car for a car, they don't do that anymore.
[00:34:32] Alice Lema: Oh, I see. Okay. So you could 1031 a car!.
[00:34:37] Anna Hamilton: Yeah. People were doing that. Okay. Well, why they stopped it? It was a lot of busy work.
[00:34:44] Alice Lema: So how many, so you can do as many 10 30 ones in your lifetime as you want. Sounds like, there's no limit. Is that right? Okay. Is there a limit to how many properties you can put into one? How does that work?
[00:34:57] Anna Hamilton: There isn't. But save your CPA, the headache, and don't move.
[00:35:03] Alice Lema: Don't put them all into one and go buy a like a small island or something. Right. So if you do these 10 31 rollover exchanges during your lifetime, and you do decide to sell it, I mean, we understand if you don't sell it that you don't have to pay, but what if you do sell it at the end? What does that look like?
[00:35:24] Anna Hamilton: So whenever you sell the property for whatever the basis is left, in that it could be zero. You could pay a hundred percent of the profit as a capital gain. So you could have no basis left. And after depreciating, it, it gets smaller and smaller every year, every time.
[00:35:46] Alice Lema: Yeah. And that was my next question. These are also being depreciated as well as sold over in the 10 31. So yeah. So this is where good tax planning comes in handy because then you can see it coming and be ready.
[00:36:00] Anna Hamilton: Yeah, it's always good to know when you're going to have a big tax bill. That's pretty for sure, for sure.
[00:36:08] Alice Lema: And there's often times, you know, things you can do about it if you have time to plan. So before we wrap up because you're a small business specialist are there any tax breaks that small businesses get or any tax liabilities that small businesses are subject to, that people should know about?
[00:36:27] A lot of people are thinking of starting a business post COVID. That's kind of the new thing.
[00:36:32] Anna Hamilton: I don't know anything off the top of my head. But I would say you probably want to think ahead and talk to an attorney first about any business plans and a CPA, because it can be very client specific needs and benefits of starting a business.
[00:36:48] Alice Lema: Yeah. Well, we just love you, Anna Hamilton Jones and Ross CPA in Eugene. How do people get ahold of you if they want to speak to you privately?
[00:37:00] Anna Hamilton: Yeah, you can call the Jones and Roth office, any location and the front desk can forward calls to me. I will say I am having a baby soon. So I am out of the office July through October.
[00:37:15] But if you're looking for a CPA and you need some help, you can always leave me a message and I can get back to you and when I'm back from maternity leave .
[00:37:24] Alice Lema: Well, and and Anna's great as is the whole Jones and Roth staff. So thank you so much. Have a beautiful weekend. We'll see you next week. Bye now.
[00:37:32] Anna Hamilton: Thank you.
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