Tax question

[xisxisxis]

I am by no means an expert on Federal and State income taxes, but while working on my 2018 tax returns I realized (and remembered from previous years), that there seems to be a huge hole in the code with respect to real estate taxes. While there are forms for almost all other transactions, I don't know of any mechanism for the IRS to know what is the exact amount you have paid on property taxes. Do any tax experts know if the IRS gets real estate reports from Local/state entities?

 

My question relates to 2018 as I can't find 1 of my payments, but recall a general dollar amount and thought I would just guess. But if there is reporting back, missing that amount may set off red flags. Anyone know?

[BrewersSuperCollector]

I know if I look up on the Ozaukee County website I can find mine. http://www.co.ozaukee.wi.us/144/Treasurer

 

Your county might have something similar.

[LouisEly]

Dumb question, but do you escrow your taxes with your housing payment each month, and if so, does your mortgage company pay your taxes for you? If so, they will have a record of it. Log on to their website and look at your escrow history or the escrow analysis they do annually.

 

I would think that if you don't escrow them and pay them directly, that would be a really big check that would be easy to find in your bank records.

 

The changes in the tax code this year limit the total you can deduct in state income and real estate taxes to $10,000. IIRC, you live in CA, so you are probably paying a lot income taxes and the combination of the two will be more than $10,000. Worst case scenario, put what you paid last year and the two will probably add up to over $10,000 and nobody at the IRS will care.

[LouisEly]

On that note, if there is a tax attorney on this board, please PM me about setting up a LLC and transferring my rental property and personal home to the LLC so I can deduct the full amount of real estate taxes.

[xisxisxis]

Dumb question, but do you escrow your taxes with your housing payment each month, and if so, does your mortgage company pay your taxes for you? If so, they will have a record of it. Log on to their website and look at your escrow history or the escrow analysis they do annually.

 

I would think that if you don't escrow them and pay them directly, that would be a really big check that would be easy to find in your bank records.

 

The changes in the tax code this year limit the total you can deduct in state income and real estate taxes to $10,000. IIRC, you live in CA, so you are probably paying a lot income taxes and the combination of the two will be more than $10,000. Worst case scenario, put what you paid last year and the two will probably add up to over $10,000 and nobody at the IRS will care.

Thanks BSC and Louis. Don't have the info needed for my county to pull up the payment history (long story/short = records are in storage 2000 miles away). I don't include my property taxes in my mortgage so that won't help. It just always seemed shady how the real estate taxes are tracked by the IRS since there are no forms. Seems like you could make any number up and the IRS couldn't verify and if it was in an acceptable range wouldn't trigger an audit. Not that I am advocating "cheating" on your taxes, but there seems to be quite a few untraceable deductions - like how do they possibly track foreign tax payments?

 

And yes I am completely screwed by the $10,000 cap. Fortunately, it's a one year deal for me as I sold my house in CA so no more property tax (or mortgage interest). I changed my residence to WI (have been traveling back/forth for >1.5 years). At some point I will purchase a retirement property and have property tax again, but at the moment I work in CA, live in WI and have to pay taxes in both states! Technically both, but CA taxes are so high, my credits wipe out any WI tax.

[olliegjw]

On that note, if there is a tax attorney on this board, please PM me about setting up a LLC and transferring my rental property and personal home to the LLC so I can deduct the full amount of real estate taxes.

 

You don't need an LLC for the rental property. Just report it on Schedule E, and you can deduct real estate taxes, mortgage interest, insurance, etc. The personal home in an LLC won't do any good, and may actually harm you when you sell the home.

[HiAndTight]

On that note, if there is a tax attorney on this board, please PM me about setting up a LLC and transferring my rental property and personal home to the LLC so I can deduct the full amount of real estate taxes.

 

 

 

I wasn't aware you could put your personal home in an LLC.

 

I remember setting one up for each rental property I have and it was extremely cheap and simple.

[HiAndTight]

On that note, if there is a tax attorney on this board, please PM me about setting up a LLC and transferring my rental property and personal home to the LLC so I can deduct the full amount of real estate taxes.

You don't need an LLC for the rental property.

Just report it on Schedule E, and you can deduct real estate taxes, mortgage interest, insurance, etc. The personal home in an LLC won't do any good, and may actually harm you when you sell the home.

 

 

I assume you mean for tax reasons, correct? Because it'd be kinda crazy to not put a rental property into an LLC.

 

I own an apartment building, this lady fell down the stairs saying there was a problem with the elevator(it's two floors, not Trump towers, but I digress) and the railings.

 

There was nothing wrong with either and it turned out her son was pressuring her to sue because he just assumed the owners would settle and had money(we don't and we didn't). But without the LLC, my Dad who invested with me...they could have gone after everything he had.

 

I now have one on each property I have, including a cabin I own in the woods as people have broken in there and it's in an incredibly rural area. If something happens and I'm deemed to be at fault somehow, the most they can get is the value of that cabin.

[olliegjw]

On that note, if there is a tax attorney on this board, please PM me about setting up a LLC and transferring my rental property and personal home to the LLC so I can deduct the full amount of real estate taxes.

You don't need an LLC for the rental property.

Just report it on Schedule E, and you can deduct real estate taxes, mortgage interest, insurance, etc. The personal home in an LLC won't do any good, and may actually harm you when you sell the home.

 

 

I assume you mean for tax reasons, correct? Because it'd be kinda crazy to not put a rental property into an LLC.

 

I own an apartment building, this lady fell down the stairs saying there was a problem with the elevator(it's two floors, not Trump towers, but I digress) and the railings.

 

There was nothing wrong with either and it turned out her son was pressuring her to sue because he just assumed the owners would settle and had money(we don't and we didn't). But without the LLC, my Dad who invested with me...they could have gone after everything he had.

 

I now have one on each property I have, including a cabin I own in the woods as people have broken in there and it's in an incredibly rural area. If something happens and I'm deemed to be at fault somehow, the most they can get is the value of that cabin.

 

Correct, for tax reasons. Rental properties should be in an LLC for legal purposes, and I recommend to all of my clients, but are not necessary for tax purposes.

 

For the personal residence, an LLC is usually a bad idea. First, an LLC is a business entity. Most personal residences have no business activity. If sued, the courts would probably void the LLC status. Second, by transferring the home to an LLC, you lose the home sale exclusion. Therefore, if you sell your home at a gain, you will be paying taxes if it is in an LLC.