Susan Geist - Tax Savvy Savings: The Tax Bucket Approach to Put Money Back in Your Pockets

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All right, hey, welcome everybody. So we just finished our breakout sessions. In our meetup, we really try to do a lot of networking in the beginning and then, you know, at the end as well. But today we're going to be talking with Susan Geist about tax saving s tax savvy savings, the tax bucket approach to put money back in your own pockets. For those that are gonna be listening in at a later date, we're recording this on October 23, 2023. So we do turn this into a podcast in YouTube as well. So for those that are listening in and also want to share this with other people in the future, you know, we'll send out a recording. So our monthly meetups the fourth Monday of every month. And really we started this back around Covid time. We really wanted to have a atmosphere where passive investors in particular were able to ask and learn along the way. And we really have tried to bring in a lot of outside speakers. I have also, you know, spoken quite a few times on our monthly meetups, but it's always more interesting and more fun to have people outside of myself share about their experience and their specialty within real estate investing. And so but we do that the fourth Monday of every month. And so we'll have our last virtual meetup in November. I believe it's November 27th if I recall. And then in December we don't have a meetup. And then in January we'll kick it back up. So a little bit about myself. So I'm based in Central Texas. We focus at CREI Partners on value add multifamily storage. And then even with that, within that storage we do like RV boat, sort of the higher end fully enclosed storage facilities. And then the builder rent investments in Texas. We've got properties in Louisiana and Alabama as well. So we're up to 36, 37 million assets under management. I left my W2 back in June. I started our company CRI Partners back in 2019 after working with CBRE for many years, and in June of this year finally was able to take the leap because we were just getting so busy on our investments with our investors that it just needed to happen. So took that leap and but it's been pretty much my entire career commercial real estate, whether it was W2 or our own personal investments. Just a few other slides here. Check out my podcast. I think we're up to like 54 episodes, which is great. If you know me, I'm very introverted. So those episodes, it takes a lot for me to do, but we are doing them every Thursday. I do one episode every Thursday I record and I've been really good at it. So it will consistently, you know, continue on. So I've got that podcast and then if you go to cr partners.com y' all can check out. We've got a lot of blogs. We do a lot of blogs. The podcast we do YouTube, our Facebook, social media has been good as well. And then the CRE partners.inv portal.com you can see where our active listings we just closed on 44 units in Houston multifamily near a property that we have that's Ivy at the Galleria. And we have a storage development in Bryant College Station. So if you're a credit investor looking to invest, we do have some openings on our storage development. I think we're about 350,000 away from finalizing that two and a half million dollar raise. And so the loans closed. Work's already being started on that. I know it's a multifamily meetup, but we have a property just like this in Huntsville, Alabama and it's been cash flowing consistently for our investors. So that's something you're interested in or at least talking about. Whether it's this one or the future ones definitely reach out. So enough about me. Let's introduce my friend and investor on one of our deals, Susan Geist. Susan grew up in a lower class family in rural Appalachia and began investing in real estate in 2008, eventually achieving a portfolio that now generates over five figures and passive income each month. Using strategic investment deductions, she reduced her annual federal tax bill from $137,000 to $6,000. $6,000 while increasing her W2 and investment income. Her current multimillion dollar real estate portfolio consists of both long and short term rentals in addition to limited partnerships and apartments, car washes, self storage hotels and mobile home parks nationwide. Through her company, Rising Famous wealth llc, Susan provides financial education, workshops and investment coaching to power other women with the strategies and confidence to grow their wealth, reduce Their tax bills and achieve financial independence. And with that, I'll turn it over to Susan, and I'm going to get out of Stop share on my side so you can share.

All right, Let me get this up and running. All right. You guys see that?

Yeah, we see it.

Right? Okay. All right. Thanks for having me, Wayne. I'm glad to be here again to talk about taxes. It's probably all of our least favorite topic to talk about, but super, super important as part of your wealth building strategy. So I've started with a disclaimer that I'm not a cpa. I'm not a certified financial professional. So this is not personal financial or tax advice. This is for informational purposes only. I believe in people becoming empowered around their finances and their taxes and getting as much education as they can to be able to evaluate their own tax situation. All right, so the two biggest wealth killers are inflation and taxes. Inflation, there's not a whole lot we can do about except maybe start buying less things. But taxes, luckily, there are a lot of things we can do to reduce our tax bills. So I started going down this path in 2021 when I was hit with a federal tax bill of $137,000. And this was more, quite a bit more, than I was making at my W2 job. And I didn't understand what was going on because my husband and I had W2 income, but we also had a lot of stock losses that year. We also had a lot of real estate losses that year from depreciation and expenses. And I didn't understand, why aren't these offsetting the income that we have coming in? And so I started reading more about the tax code, learning about the tax code, and start starting to kind of decode how the IRS categorizes our income and the deductions. All right, I stopped looking for angels, and I started looking for angles. So after using this tax bucket approach, I got my 2022 federal tax bill down to $6,500 with higher income. So, as you can see, doing tax optimization can be extremely lucrative. You can actually make more from this than even taking a second job or doing a side hustle. You can really use this to grow your wealth if you know the right tools and techniques for your situation. So the goal of this tax bucket approach is really to visualize how income is divided into the active portfolio and passive categories and be able to pair each of those with deductions in order to lower your tax bill. So why even care about any of this? So just to show you. If you can just save $1,000 a year on your taxes, which isn't that hard to do actually after 30 years, if you invest that money every year, you'll have almost $131,000. If you just save $1,000 once on your taxes, in 30 years, you'll have $11,000. This is the power of compounding and the time value of money, how it will grow over time. If you can save money on your taxes each year, and if we look at going bigger, so what if you can save $10,000 a year on your taxes, which again is not actually that challenging to do, over 30 years, you save $10,000 each year, you'll have over $1.2 million. You've got your retirement set there just for money you've saved on taxes. If you save $10,000 just one time and you're 30, you're looking at over $109,000. And so in my situation, I mean, I saved over $100,000. I mean, think about that compounded what that could do for my wealth and my family's wealth in the future. So what if you don't really care about taxes, right? They're just not. Not your thing. There are also a lot of benefits from just getting your adjusted gross income down on your tax forms. That number is used to determine all sorts of different things. So it's the number that you put on the fafsa. So if you have children going to college, this is the number they're going to look at to determine how much aid your child is going to get. This number is used for the Affordable Care act plans. It determines how much you pay in your premium. So another reason to try to get that number as low as possible. It also is used to determine your Medicare premium. So if you're at retirement age or close to retirement age, there are a lot of benefits to getting your AGI down on your tax return. Even if you don't care about the tax benefits, there are all these outside things that it impacts. But should you feel bad about paying fewer taxes? So the government writes tax law to shape the economy. They are incentivizing and disincentivizing different behaviors using the tax code. So I mean, you can think about like sin taxes, right? Like paying extra taxes for cigarettes, for alcohol. So they're trying to disincentivize that behavior through taxation. Well, the opposite also occurs. So they give you tax breaks in return for doing things like saving for retirement, providing housing for other people, creating jobs. So starting your own Business and also energy production. So investing in oil and gas. So essentially, I mean, you're doing what the government is incentivizing you to do. And you shouldn't feel bad about that. But I already have a cpa. So this isn't. Tax planning, is not to replace your cpa. So a CPA tends to be very reactive, right? So you bring your CPA, all of your forms, your spreadsheets, QuickBooks, whatever you have together, your CPA puts it all into the forms and sends it to the irs. Your CPA is not buying investments for you. They're not investing in retirement accounts or a health savings account for you. They're not doing tax loss harvesting for you. All of this is on the front end, right? So this is being proactive about your taxes and understanding what you need to do to put yourself in the best situation. When you do bring all of your numbers to the CPA so they can get you the tax refund that you deserve, right? So really it's, it's up to you to understand this and take the steps that you need to optimize your taxes. And it's also helpful because a lot of CPAs, if you have real estate investments, a lot of CPAs don't specialize in real estate investments. And so it's helpful to be able to look at the tax return you get back from them and see if everything has been set up the way that you expected it to be set up. So everyone has a unique tax situation. And really, knowledge is your best tool. There is really no downside to being empowered around taxes. So two main income tax rates that you'll see. So These are the 2023 ordinary income tax rates. So this is what most of your income is taxed at. And so you're probably familiar with these. It goes from 10% to 37%. My thing won't go. There we go. And then the long term capital gains tax rates, so you can see they go from 0%, 15% and 20%. So they are quite a bit lower than the ordinary income tax rates. So the more of your income you can get in long term capital gains rates, the better compared to ordinary income tax rates. So let's get into the tax bucket formula. So like I said, this is a visual way of looking at taxes that I put together because I was having trouble understanding where my income was being divided up by the IRS and which deductions could be applied to which income. And so as you see here, so there's three different kinds of income. So there's active income, also known as earned income. So this will be like your W2 income, your 1099 hourly income, business income, like active business income. All of that will go in that red bucket portfolio income that'll be like your stock portfolio, your interest, dividends, things like that. What we typically think of as like a standard, like investment account and then your passive income. So these are going to be your passive, essentially passive businesses. So your rental properties, if you're invested as an LP and syndications, that'll go in this passive bucket over here. Really any anything you're receiving money from, like royalties and distributions from where you're not actively involved in that business will be over here in the passive bucket. And there are different deductions that apply to each bucket. So let's see it in action. All right, so we had a client come to us and I'm going to call her Meredith. I changed her name for privacy, but she was a single woman. Her income comes primarily from her W2 job, which is in the active, the red bucket, and the stocks from stocks in the blue portfolio bucket. She did not have any real estate, but she was open to investing in real estate. So her primary goals were to reduce her annual tax burden and diversify her income streams. So just taking a look at her buckets at the outset, so she was making 200,000 a year at a W2 job. And then in her portfolio bucket, she had $10,000 in dividend income, $10,000 in interest income, and $20,000 in long term capital gains from some stock she had sold that year. She had nothing in her passive bucket. So when we look at her tax burden, you can see she was making $240,000. So that as a single person puts her in the 35% tax bracket. So that's very high. Her standard deduction was for a single person only, $13,850. So her approximate tax due was $53,000, which is a significant amount since she's only making 200,000 at her W2 job. And that doesn't even count what's being taken out for the FICA taxes, the Social Security and Medicare on top. So here's what we did with Meredith. So first we wanted to hit the low hanging fruit. So we had her invest in her tax advantaged accounts that were available to her. So she maxed out her 401k. She maxed out her health savings account. We had her put some money in a limited expense FSA for dental and vision expenses. We did a little bit the 3,000 extra of tax loss harvesting, which I'll talk about in a minute. And then she was in an interesting situation because her property that she owned actually had the opportunity for an adu, an auxiliary dwelling unit in the backyard. And so we actually had her set this up as a short term rental. And there were a few reasons for this. So the IRS will classify short term rentals as active businesses if you are managing them yourself. So this will move that type of rental from the passive bucket to the active bucket. So short term rentals can be a really good way for people with high W2 incomes to have some write offs from real estate in that red bucket, the red active bucket. So in her case, so she was putting in enough hours, she was managing it herself, so it was counted as an active business by the irs. So she was able to do a cost segregation and take some bonus depreciations, accelerated depreciation on that. And then because it was in her backyard, she also was able to take some of her normal expenses and classify part of them as business expenses. So like her Internet that she was already paying for, well, a portion of that also was going now to the short term rental and she could write that off on her taxes as a business expense. Same with her cell phone. She was talking to guests on her cell phone. Same with like the lawn care, her utilities. And so now it's taken, you know, these normal expenses that she had that were just expenses and you know, weren't write offs at all. And now a lot of them are classified as business expenses and she gets to write them off. So after all of that, it generated in that first year, $120,000 loss. Now most of that, as I mentioned, is like a paper loss from depreciation and from these expenses that she was paying for anyway. And then she made 30,000 in short term rental income. So she did have income from that. So after all those deductions, we got her active bucket down to $65,800. And then on the portfolio side, we had her do tax loss harvesting to negate her capital gains from stock sales and tax loss harvesting. That's when you're able to generate a paper loss from your stock portfolio. And it's a great way to offset capital gains. And you can offset any kind of capital gains. So even if you sell real estate, you can do tax loss harvesting against those capital gains too. But in her case, she had sold stock and was able to to negate that. So we got her down to $20,000 in portfolio income. All right, so let's take a look at how it turned out. So her previous tax burden was $53,000 on 240,000 in income. So her current tax burden, with this optimization, we got her tax bracket down to 22%, and her approximate tax due is $13,000 on $270,000 in income. So her income went up. Her taxes went down by $40,000. So let's take a look at what that means. So if she just takes that $40,000, she invests it 8%. So over 30 years, that $40,000 will become $437,000. And that's just investing it one time and never doing any tax optimization again, which, of course, hopefully, she would keep doing this. But, yeah, that's the power of stopping to look at your taxes. Right. And saying, what? What can I do better on my taxes? How can I take advantage of what's out there and find ways to take these deductions against the income that I have? All right, so let's take a look at another example. So this is a couple that came to us, Sam and Shelby. Again, I changed their names for privacy. So they were filing as married, filing jointly, and their income came primarily from their W2 jobs, which, of course, is in the active bucket. And they owned three rental duplexes. So that was over in the passive bucket. And so this was. They had a similar situation to me where they had two sets of income in very different buckets that they were working with. Sam really wanted to leave his job because they wanted to start a family. So their primary goals was to allow him to leave his job to cover more of the household responsibilities, which would free Shelby up, too, so she could just focus on work and then have, you know, free time available in the evening. But they also wanted to maintain financial security for the family. You know, one person leaving their job can throw a family in turmoil financially. So they wanted to see if there was a way that they could actually do that. All right, so when they started out, this is what their buckets looked like. So Shelby was making 200,000 at her W2 job. Sam was making 120,000 at his W2 job. They had about $10,000 in dividends coming in every year and 150,000 coming in from their rental duplexes. So if we look at just straight tax burden without any deductions other than the standard deduction, this is what their taxes would have looked like. So their income, 480,000. That puts them also in the 35% tax bracket. Very high. They get to Take the standard deduction for a married couple. So their approximate tax due was $106,000. So. So this is almost as much as Sam was making at his W2 job. And as we know, he wanted to leave his job. So it looked like, okay, let's figure out a way to do this. If we can get rid of your tax bill, then this looks very probable that you could have a similar financial scenario. So I'll show you what we did. So first we looked at, okay, well, just Shelby is working. So again we're going to hit this low hanging fruit. We're going to max out all the tax advantaged accounts. So we had her max out her 401k, max out the health savings account and she gets to take a higher amount for that because she's part of a family. We had them put money in a limited expense fsa. We again did the tax loss harvesting. You could do up to 3,000 towards active income and the standard deduction over in the passive bucket. We wanted to make sure they were taking full advantage of their deductions over there. So we had them, you know, look at their, all their depreciation expenses and everything. And they were able to deduct $120,000 rental loss. Again, a lot of that was a paper loss. And then we had them invest in as an lp, a limited partner in real estate syndications that generated a lot of depreciation. So they were able to generate $200,000 in depreciation that year from their investment. But as you can see, we still have the problem right, where we've got a lot of income coming in in this active bucket and a lot of deductions coming out of the passive bucket. And it would be great if we could take those two buckets and combine them. Well, there's a way to do that. So since Sam is no longer working his W2 job, he took over management of their duplexes. And so that gave him enough hours to obtain real estate professional status. And so that indicates to the IRS that you have an active business in real estate. And he was able to do a grouping election on his taxes to also group in that syndication distributions as part of his business, overall real estate business. And so that allowed him to dump that whole green bucket, this passive bucket, into the red bucket. And this is a very powerful strategy that a lot of couples use where one has a really high W2 income, they also own rental property, and the other spouse will get real estate professional status. And you don't have to be a realtor you don't have to get any sort of certification. You just have to meet the criteria. So you have to put in a certain number of hours. It has to be the main thing that you do. So you can't have a W2 job and claim real estate professional status. The IRS will come after you and audit you for that. So don't do that. But otherwise, you know, as long as you're meeting the hourly requirement, it's pretty, pretty easy to do this. And you can get your taxes down extremely low. So let's take a look at what this does to their taxes. So as you can see, we've moved everything from the green bucket now over to the red bucket. So the income over there, we've got 200,000 from Shelby's job, we've got 150,000 in rental income. We've got all the tax advantaged accounts we had before. Now we also have their $120,000 rental loss. Again, a lot of that's a paper loss. And their depreciation, another paper loss from their syndications. So they ended up with negative $33,000 in their active bucket. And we still have the $10,000 in dividends in their portfolio bucket. So it's not really any use to have negative numbers in your active bucket. You don't get, you typically don't get a refund for that. So we wanted to take advantage of that, right, because we had this negative 33,000. You can carry it over in the future. But we wanted to go ahead and do something with it right then. So we had Sam do a $33,000 backdoor Roth IRA conversion tax free. So Sam and left his W2 job, right? So he had a 401K. So he went ahead and rolled that over to a regular ira. So all that's tax free, right? Because you put your money into a 401k pre tax and you can roll it into regular IRA without paying taxes. Normally when you roll into a backdoor Roth ira, that's when the taxes are due and you've got to pay regular income taxes on that. But because they have a $33,000 loss already, they can do this $33,000 backdoor Roth IRA conversion and not have to pay taxes on it. So they took this money right when Sam was working, put it in the 401k tax free, rolled it to the IRA tax free. Now they're rolling it to the Roth IRA tax free, and it will grow and they can withdraw it tax free. So it's completely tax free. Retirement money.

Hey listeners, it's Wayne Courageous. I just want to pause real quick say thank you for listening to our show. I hope that you're getting a lot of value out of it. If I could ask you to go ahead and like subscribe and share this podcast, that would mean a lot. It will get a lot of other investors like yourself learning about the process and the steps to successfully invest in real estate, either as a passive or an active investor. I also want to do a quick introduction of Crei Partners. I'm the managing principal for Crei Partners and we started it back in 2019 with one goal, to grow your wealth passively in real estate. We do so by buying assets in multi family, build to rent communities and RV boat storage facilities. And we do so in areas that have strong market fundamentals and also have strong partnerships with other real estate investors such as ourselves. We personally discovered that passively investing in real estate was a really great blend for people that are busy like yourself and that you can invest passively in real estate and still reap the rewards of the returns, the tax benefits, et cetera. If you're interested in learning more about passively investing, check out our website. We do a lot of content through our passive investor coaching program, through our podcast, our blogs and just other information that we do on a daily basis. Check out creipartners.com again creipartners.com if you're interested in building the relationship and joining our investor club, there's a link there to to join. We'll set up a call and continue building the relationship with you. We're super excited to have that opportunity and I want us to get back to the show and hopefully again you're enjoying the conversation and look forward to connecting soon. Thank you.

So let's take a look at what we have now. So in the active bucket you can see we've added in this $33,000 backdoor Roth IRA income because it is considered income and that brings us to $0 in that bucket. So 0% tax rate and then dividends, so they're under the threshold. And the long term capital gains, that tax, the dividends are taxed at that rate and they are under that threshold. So they're in the 0% tax rate for those too. So they actually could have made more money in dividends and still been in the 0% tax bracket for that. So their previous tax burden, $106,000 on 480,000 income, their current tax burden, we got them down from the 35% bracket to 0%. The approximate tax due is $0 on $383,000 in income. So, yes, their income went down, but they still came out ahead. So overall, they're in a better net financial position. Sam is not having to work. He has more family time available, and it's now freeing up Shelby's home responsibilities. So things were better with them all around. They contributed and now can withdraw $33,000 in retirement funds completely tax free. They now have income benefits for the Affordable Care act, for FAFSA and Medicare if they need them, they're showing a very low income. And then if they're able to take that hundred thousand that they saved and invest it just one time, just invest it, put it away at 8%, they, in 30 years could have around $1.1 million just from this one year of tax optimization. So the tax bucket formula is a really powerful visualization tool because it allows you to actually see what bucket do things belong in. And things didn't make sense to me until I started writing it out in this way, in this visual manner. You know, I think we all hear all these buzzwords, you know, depreciation, tax, loss, harvesting, cost segregation. And it's really hard to understand how all that works together until you start writing it out with the income buckets and see where it goes in and where it's coming out. All right, if you're ready to learn more. So my business partner Caitlyn and I are working on putting together a full online course on this. So we've done a fair number of, like, in person workshops, but I get a lot of people coming to me saying, hey, I'm not in Austin, but I still want to learn this. So we're going to do an online course that'll be downloadable. Hopefully it should be available early next year. So we're going to cover about two dozen tax bucket reduction strategies and how to plan for your optimal tax scenario. We'll also look at how to read your tax return, all the different schedules, all the forms you need to know, and then we'll have bonus lessons on how to interpret those dang K1 forms that a lot of us get when we're invested in syndications, what all those numbers mean, where they go on the tax return, how to put in the QBI numbers, because that's pretty complicated. IRS tax forms that investors should know, like the 8582, where your passive carryover loss is. That's a very common question that we get is how do I find that number? Where is it? I mean, my 2022 tax return, I do my own taxes on TurboTax and that tax return was 480 pages long. So it can, it can get pretty complicated. But there are particular forms that you should know. You don't have to know everything, but there are particular forms that if you're an investor, you should know. And then we'll also go over other taxes you may encounter. So there's, you know, the FICA taxes, self employment taxes. If you have a self directed ira, there's all these unrelated business income taxes that you might be hit with. There's amt, just a lot of, a lot of different other things that may apply to you, but not necessarily. So that'll be like a bonus lesson if you're interested in that. All right. And I have a QR code if you want to get on the wait list. We also have a free newsletter that we send out. We have a blog on our website. We do one on one consultations. If you're interested in working with us on tax strategy or just your, you know, want to run by some different investment plans, we can look at stuff, we look at ppms for syndications and help people interpret those. We also. So we'll do workshops and we do speaking. So if you're interested in any of that, feel free to reach out. I've got our website here. I've got my email and my business partner, Caitlin Muldoon is actually, I think on this call too, so she's also available. So, yeah, I think, you know, tax optimization, you know, as as dry of a topic as it sounds like it's something that can really impact your life and your financial future just by taking a little bit of time to think about it and learn what works for your situation. You don't have to learn all 70,000 pages of the tax code, but if you figure out a few things here and there, you can make a really big difference for your future and your family's future. And in some ways I feel like a lot of the tax code is written for the billionaires, the ultra wealthy. And I feel like learning a little bit of it and being able to take advantage of a little bit of it kind of, you know, it bumps us up and we can ride that ultra wealthy wave for just a little bit, right, and get to take some of the advantages that they're taking and how they get so wealthy and how they can stay so wealthy. So I think it's really empowering to learn about and I am happy to help you guys in any way that I can. So thank you.

Susan. That was really great. One of the questions that's been in the meeting chat, it's been answered, but I feel like it'd be good for people to. Who are listening, whether it's a podcast or down the road. So the question is, following up on Sam's case, did you mean you can claim depreciation from your syndication when you're an LP as long as you have the real estate professional status? And then Caitlin responded, as an lp, you can claim that depreciation reps allows you to apply those losses to your active income. And then he says, without materially participating. And that's where it stopped. So maybe clarify a little bit more if you could, Susan, on the real estate professional status and then how it ties to a limited partner for loss purposes.

So you can. So you, you have to do a grouping election on your taxes, which is a separate form. So you will group that. So you've probably seen on your taxes where there's like a, a question that says, you know, is this business related to any other business? That's what it's asking about. So it's asking, are you grouping this with any other active business? Is this part of something else? And that's where you would say, yes, this is part of my active real estate business. And it will all be grouped together. Now, once you group it, you typically cannot ungroup it, so you want to make sure that you want to have it grouped essentially forever or until that syndication exits. But yes, so you can, you can do that grouping election. You do need to have some active real estate. So your own, like, duplex, fourplex, like you need to have something that you own that you're managing that you can say, okay, this is my active business, but this other thing over here, this is part of that. And you can group it together. So if you just have syndications, you're not going to be able to get reps. But if you have syndications, you know, plus some duplexes, plus a four plex, and you meet the hourly, the hourly criteria, then yes, you can group those together.

Yeah.

And the hourly criteria is 750 hours. So as Susan mentioned it, it becomes a big red flag for the IRS if they see that you have a W2 and you're, you know, claiming the rep status because 750 hours on top of a day job is, is a lot. But one recommendation I got from our tax consultant is like, every time you have a call, like this meetup is an hour on my schedule. And so at the end of the year, I print out our schedule and it's easy to back up that 750 hours when you are active in real estate for yourself or for other partnerships. I did get a question when someone was signing up. So this question is, what can you do to prevent paying all taxes on income from owner financing? This is my first and only investment so far.

So owner financing is a little bit different in it. It's a challenging one to, to eliminate because it comes in as interest income. So it's sitting in your portfolio bucket usually. And that's, that's a challenging one. Yeah, I would have to look into that a little bit more to see because I haven't done owner financing on any of mine. I am invested in some debt funds, so that's something I'm going to have to start looking at because that's going to come in as interest income for me on it to 99. Yeah. Do you have any advice, Wayne?

I don't because I don't do anything owner financing. So we just bought a property that they're doing that, you know, seller financing, but I don't have anything that I'm doing the financing on. So it's a great question, but.

All right, looks like Moses. You have your hand up.

Hey, Susan. Thank you. First of all, I want to commend you and Caitlyn as two female to hit this topic up. You know, Wayne knows me. This is my forte. So the one thing I've learned new tonight was the rollback IRA that I didn't know. So that was my big takeaway tonight. But I'm very good friend with Brandon hall and Thomas, so they're 469 all the way. So I've always advised my clients. And you know, I'm a realtor by profession, so I know this to a great degree. But I do have two questions. One is going to be a recommendation that if the two of you are going to do anything online, I recommend highly that you do a K1 entry and show LP how it's done. Because I use TurboTax as well. That's the one thing that's missing on YouTube or anywhere that you go. There are some that they talk about, you know, when it's a publicly traded business. But they don't do a regular LPK one anywhere. And I think those entry would probably give you a lot of hits if you can do it on there. And it's funny when you mentioned when you do the K1, when you do the entry, you have to select Is it part of another business? That's where a lot of folks fail to realize. That's where you group. You group all of your activity as one and then you put in the ein and what's not, you know, to show where it's going. But here's the question I have for you. I wrote it down. I gave you the recommendation. Oh, on the question that Wayne asked, would it be possible if you do have a final K1, that your losses could wipe out the dividend that's coming from the seller financing? I know you said you're not a cpa, but I'm trying to think along the same line because when you have a final, it's my understanding that if it's, if you have suspended losses, it can go against all income for that year. So if you time it right, would it work? That's maybe something for you to research and see if it, it brings any, you know, merit to it. But that's my only one thought when that question came up from Wayne.

Yeah, I'll have to look into it and see if anyone has been successful with that, I think. So most of that is going to come in when the syndication exits. Right. It's all going to come in on the schedule E and the interest income is on a different schedule. It's on a schedule C, I believe.

But can the liquidation at liquidation, there's. It's not going. The passive is not going any farther. So you can't do anything with sitting losses at that point, whether it's depression.

So that's. Yeah, that's your passive carryover loss.

Correct. But if it's a final, it doesn't carry. Except if you group it and then you have it as one trade of business. Danielle, Carry.

I'm not sure my thought would be that it would still carry, but yeah, I'll have to look into that.

Okay.

Because I know usually it will carry over from year to year on that.

85, if it's grouped and you're a real estate profession. If not, it's suspended, it's first in, first out or whatever. They treat it how they treat it. So only if it's not. If you weren't a real estate professional and you, you had to suspend the, the losses until your final K1, then that year, if you had the seller financing, it could have wiped out all ordinary income at that point it used up. Then you use it against anything.

Yeah, I'll have to look into that because that, that could potentially be an option. If that works. Yeah.

All right.

Well, that's that's all. But I wanted to say thank you. I mean, I think it's a great presentation. You made it very simplified, more than any cpa, you know. But Brandon does a really good job too. The two guys are really good at it. But I did like your presentation. I wanted to say thank you to both of you. I think it's something that's really needed for the LP especially. And there's some GPs, you know, because there's some different rulings for GP, how they are treated and they have to hold it for a certain amount of years, I think more than a year. What's not, you know, three years portfolio, so.

Well, thank you, Moses.

Anytime.

Yeah, thanks, Moses. There's a lot of traffic on the chat about the real estate professional status and you know, I think the biggest thing is, you know, talk to your cpa and a lot of times it's interpretation of such. And I know there's a lot of blogs and things, but ultimately, you know, whether it's investing in a syndication or, you know, do anything, I mean, like Susan said in the early part of her presentation, you know, she's not a cpa, but definitely reach out to, to your cpa. If you don't have a cpa, this is the time to do it. Don't wait till January, February, when they're so busy and their own tax for the existing clients. But I will say again, you know, if you are doing what I'm doing and just scheduling all the calls, all the activities, you know, I'm driving to Lafayette tomorrow. I mean, that's all part of work, you know, just keeping that all in the schedule. And if y' all are able to back up the 750 hours, whether you, you know, do other things work related, then, you know, maybe you're fine. But ultimately, you know, definitely talk to your CPA or reach out to Susan or Caitlin directly. Hey, Susan, as we close up here, let me see if there's one more question. But since it's a PI, this is going to turn into a podcast. Can you just state your email and your website so that way if anyone's listening and not seeing your slides that they can reach out to you directly?

Yeah, no problem. So the website, it's rising from wealth. So www.risingfemwealth.com and my email is susanizingfimwealth.com and Caitlin's is caitlin@risingfimwealth.com hey Wayne, I remembered my question.

I know it's on the hour. Would you Permit me, please.

Yeah, for sure. And what I was going to do after your question, Moses, I'll stop the recording and then if there's any other questions that may come in, I'm sure Susan, give us another five minutes or so. So Moses, go ahead.

Okay. So Susan, this is the one question. I heard you address it, but I wanted to make sure I had it right. So even though my spouse is a W2, I'm a realtor by profession, so I have all the time. I've never been audited for real estate professional status because this is my full time work whether investment and selling property. But can my wife not help me make up the hours? Under one has to be qualified for the rep status. But can the spouse not help you Even though she's W2 with making up the material hours?

I use my husband's hours on my short term rentals, so and that's to reach our 100 hours to get the the active participation. So I believe that your spouse, if you jointly own the property then they should be able to count their hours also.

Okay, that's what we make sure. Thank you.

Well, Susan and Caitlyn, your counterpart, do you want to say anything? Kaitlyn, even in the background.

Thanks. Hey everyone, thanks. Thanks for joining and and thanks for having us on. Wayne, I think that these are great questions. So I've been trying to keep up in the chat, but also furiously taking notes to blow up on on some of these awesome questions. So appreciate the opportunity to do that.

Yeah, absolutely. Well, thank you all both. I'm gonna stop recording and then we can take it offline for the next five minutes or so.

That's all for this episode. We hope you subscribe, share and leave a review of the show. For more information about passively investing in multi family apartments, check out Wayne's free ebook by going to creipartners.com forward/ebook. Also follow us on Feedback Facebook by searching CREI partners. This was the untold stories of real estate investing.