American Monetary Association Features Real Estate Tax Tips from Diane Kennedy

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The American Monetary Association, the premier resource for wealth building, discusses real estate taxes with famed CPA Diane Kennedy

American Monetary Association

Some of the challenges the IRS is making right now are related to, ‘how active are you, really?’, said Diane Kennedy

Diane Kennedy, author of Loopholes of the Rich and Real Estate Loopholes, joined the American Monetary Association for an informative interview during its 32nd podcast. Kennedy gave incisive tips to real estate professionals that just might make tax time easier.

“For years, I’ve talked about how you can get cash flow from real estate and yet legally show on the tax return a tax loss,” said Kennedy said. “It’s a paper loss. Over the years, the IRS has made it tougher to take that loss.” For instance, a property owner earns less than $100,000 annually; the owner can take a loss of up to $25,000 against other income. If that salary exceeds $100,000 a year, none of the loss can be written off. It phases off between the $100,000 and $150,000 brackets.

Kennedy continued, “There is a trick called the real estate professional status. You need to spend more hours in real estate activity than any other business. In addition, you’re required to spend at least 750 hours yearly doing real estate-related tasks—that’s about 15 hours per week.”

Unfortunately, the IRS is trying to close that loophole due to instances of abuse. As a result, Kennedy advises those that write-off those expenses to expect an IRS audit. Prepare carefully through microscopically prepared financial records. Try to log at least 1500 hours of work as well.

“Some of the challenges the IRS is making right now are related to, ‘how active are you, really?’ Sitting at your computer and looking through properties isn’t going to count,” she continued. “They want to see you out there. Show that you’re actively managing these properties.”

In addition, real estate professionals must materially participate in the management of the properties. “You need to spend 500 hours or more per property,” commented Kennedy. “You may make an aggregation election if you own too many properties to spend 500 hours yearly on.” However, if one of those properties is foreclosed or short sold, complications may ensue. “If you have a property that goes bad through a loan modification or short sale and you take a loss; if you’ve previously aggregated your properties together, you must undo that before you sell,” said Kennedy. “That means you can’t claim your hours for the property you took a loss on.”

What if an individual is a real estate investor, but not a Realtor? There’s hope: if that work is real estate-related for a real estate firm, one may claim that time if owning at least 5 percent of the company. However, if the individual is only a real estate investor, it is still possible to qualify as a real estate professional as long as those hours are invested.

Diane Kennedy, a preeminent tax strategist, is the founder of USTaxAid Services, a leading tax firm that works with clients throughout the U.S. and founder of TaxLoopholes, an award-winning online tax education site. Diane is the author of The Wall Street Journal and Business Week bestsellers, Loopholes of the Rich and Real Estate Loopholes, and co-author of The Insider’s Guide To Real Estate Investing Loopholes, The Insider’s Guide to Making Money in Real Estate, The Insider’s Guide to Tax Free Real Estate Investing and Tax Loopholes for eBay® Sellers.

About American Monetary Association
The American Monetary Association is a non-profit venture funded by The Jason Hartman Foundation which is dedicated to educating people about the practical effects of monetary policy and government actions on inflation, deflation and freedom. Our goal is to help people prosper in the midst of uncertain economic times. For information, visit American Monetary Association online.


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Nicole Thome
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