In this Tax Tuesday episode, Anderson tax attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., tackle a diverse range of tax questions covering rental property strategies, depreciation rules, and business structure optimization. They explain the tax implications of renting property to family members below market rates, including income reporting requirements and limited deduction capabilities. The attorneys discuss gifting rental properties to children and the associated gift tax filing requirements, while exploring sophisticated property management company structures for generating earned income and maximizing retirement contributions. They provide detailed guidance on utilizing IRS sections 168 and 179 for depreciation and bonus depreciation, clarifying the current 100% bonus depreciation rules and debunking outdated 80% figures. Other topics include S-corp benefits for 1099 contractors, holistic health business taxation, accountable plan cell phone deductions backed by IRS Notice 2011-72, vehicle deduction methods and limitations, and even professional gambling expense deductions for Vegas visitors. Throughout the episode, they emphasize proper entity structuring, asset protection, and tax planning strategies.

Submit your tax question to taxtuesday@andersonadvisors.com

Highlights/Topics:

"I have a question about tax implications of renting my property to my parents. If I rent it to them for less than fair market value, are there any tax incentives or exemptions in this situation? I'm trying to understand whether I would still need to report the income and if I would lose the ability to deduct expenses associated with the property." - Must report income; IRS treats below-market family rentals as not-for-profit activities.
"In 2024, I deeded some rental properties to my children about $250,000 each. Is there a way to write this off?" - No deduction available; must file Form 709 for gift tax reporting.
"I have four rental properties. I personally manage them through an LLC. Can I use my company as a management company and charge a 20% fee for managing it to be able to show I have earned income and then contribute to an IRA? Also, would I be able to establish a Roth IRA?" - Yes, with reasonable fees and proper structure; enables IRA contributions.
"How do I utilize IRS code section 168 and 179 for depreciation and bonus depreciation? How do I buy cars and furniture right off up to 80% of the value of the property every time I buy a house rental or asset? Can I utilize AI or any AI software with these to automate and hands off anything?" - Use 179 first, then 168 bonus depreciation; now 100% not 80%.
"I'm a 1099 independent contractor. I own two pieces of property, one is my primary residence, the other has a home and a small apartment on it that I rent out long term under the table. My thoughts are that I need to create an LLC for my business, possibly an S corp. As I understand the tax laws, there will be no way to use any of the rental properties to reduce the tax burden of my 1099 income. Am I on the right track here?" - Report all income; S-corp saves self-employment tax; passive losses don't offset.
"I'm going to start a consulting business that focuses on holistic health. What should I be looking for in the next six months or so when I launch? Is taxation different from real estate and in what way?" - Consider S-corp for self-employment tax savings; business expenses differ significantly.
"With an accountable plan, can I deduct a hundred percent of a cell phone? Is there some documentation that backs this up? Prove it." - Yes, 100% deductible with S/C-corp; IRS Notice 2011-72 provides documentation.
"I have a question about vehicle deductions. There are two methods available, the standard mileage deduction and the actual expense method. Can I use the actual method to claim all the depreciation in one year, then switch to the standard mileage deduction in subsequent years. If this is possible, how does it work? Assume the vehicle is used a hundred percent for business purposes." - Three methods exist; business-owned vehicles allow 100% bonus depreciation benefits.
"Since you're in Vegas, you might know the answer to this one. My friend won a reportable jackpot, mid five figures, and he was wondering if he could deduct the travel lodging expenses just as he might do if he made this money as a business deal or future excursions to Sin City to try and extend his winnings." - Only if professional gambler with business intent and meticulous records.

Resources:

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IRS Sections 168 & 179 Made Simple How to Boost Depreciation Deductions

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