Ep. 107 – Make sure you pay your taxes; otherwise you can get in a lot of trouble.

Matthew Maschler:
Welcome to the Real Estate Finder podcast. I’m Matthew Maschler, real estate broker with Signature Real Estate Finder here in the great state of Florida. And with me the co-host of the Real Estate Founder podcast, Stacy Garcia. Hi Stacy. Hi
Staci Garcia:
Azi. How you doing?
Matthew Maschler:
I’m very good. Very good. And also we have my real estate partner of 45 years, Jill Glanzer.
Jill Glanzer:
Hi everybody. Excited to be
Matthew Maschler:
Here. She’s been doing real estate since she was a baby and we have a very special guest in the studio today. We have Jessica Green from, what’s the name of your business?
Jessica Green:
Green Tax and Business
Matthew Maschler:
Advisors. Green Tax and Business Advisors. That’s your website also, right? Green Tax and Business Advisors? Yes. Awesome. So met Jessica recently and we started talking about taxes. It’s one of the subjects I like talking about. It’s kind of weird. I like talking about
Staci Garcia:
Taxes.
Matthew Maschler:
Taxes, Las Vegas wrestling, college search, weird stuff. So yeah, so we invited Jessica to come onto the podcast and talk about taxes because we’ve done over a hundred episodes of the Real Estate Founder podcast and the subject of taxes hasn’t really come up that often.
Staci Garcia:
Actually, I do have a lot of questions about it. I just never had anyone to ask. Right. Even recently I was just asked about capital gains and I was like, I don’t know anything about that.
Matthew Maschler:
Do you know anything about capital gains?
Jessica Green:
I know a little bit about capital gains. Yes.
Matthew Maschler:
Okay,
Staci Garcia:
So I, should I ask a question or you want to tell us about your business? I
Jessica Green:
Can tell you a little bit about myself. Yes, please go ahead, ask a question. I primarily work with real estate investors, property managers, construction companies, and I also work with professional services doing tax strategy and planning and full service accounting.
Staci Garcia:
Interesting.
Matthew Maschler:
You do tax returns? We do
Jessica Green:
Tax returns, we do bookkeeping accounting, and a lot of what I do is tax strategy strategy.
Matthew Maschler:
Alright. And it’s actually very timely, right here we are. It’s the end of February I’m sure. Is it already your busy season or getting into it?
Jessica Green:
It’s really busy because March 15th you have partnerships and 1120 s tax returns due soon sub chapter. So we’re just gearing up for that.
Matthew Maschler:
We’re gearing up for that. March 15th is coming up. I always thought it was April 15th.
Jessica Green:
April 15th is for your personal tax return.
Matthew Maschler:
Oh,
Staci Garcia:
Lemme just learn something new.
Matthew Maschler:
There we go. And I guess they have to do those partnerships on March 15th, so that way someone has the information so that they can file on April 15th.
Jessica Green:
Right. So let’s say you’re part of a syndication or you have multiple partners and you own real estate, or you’re buying and selling real estate. You can do a partnership or S corporation and then you get a K one. That K one gets onto your personal tax return. So you can be a passive or you can be actively participating in business.
Matthew Maschler:
Gotcha, gotcha. That’s
Jessica Green:
Where ordinary.
Matthew Maschler:
Are you an accountant?
Jessica Green:
I’m a tax accountant. You’re a
Matthew Maschler:
Tax accountant. Is that a type of accountant?
Jessica Green:
Yeah, I focus mostly on tax strategy and I also have a wide range of people on my team who range from PAs, CPAs, other bookkeepers, the tax preps, and I’m the owner of my business.
Matthew Maschler:
And you own the business and you’re relatively new to South Florida?
Jessica Green:
Yes, I’ve been in Florida for a year and a half. I bought two years ago, but I moved here a year and a half ago.
Matthew Maschler:
Alright, where’d you move from?
Jessica Green:
I moved from Dallas, Texas and great place, but we’re really happy to be here in Florida, in south Florida.
Matthew Maschler:
That’s awesome. What made you move to South Florida? Was it the Texas,
Jessica Green:
There’s no state taxes in Texas. No state taxes in
Matthew Maschler:
Florida. Okay, so that was a wash.
Jessica Green:
Yeah, wash. I moved here to be closer to my parents. I have young kids, so they get to be raised with the grandparents. That’s cool. Nice. That’s nice. I have my own house. They have their own house, but we’re six doors down. Oh, that’s awesome. So they opened the door and run to their house. That’s amazing.
Matthew Maschler:
Adorable. That’s a
Jessica Green:
Luxury.
Matthew Maschler:
Yeah, twice I lived in the same neighborhood twice while married to my wife Wendy. I lived in the same relatively neighborhood to my father and she always insisted it wasn’t the exact same neighborhood, so we could not do that.
Jessica Green:
Right, right. A little too
Matthew Maschler:
Close. She likes that we live in a gated community, so when they come through the gate where she gets a two minute heads up.
Jessica Green:
Yeah, my stepfather is actually a public accountant also. So we get to discuss some of the new tax law and argue between the both of us. Well, I interpret it this way. You interpret it that way because you can look at something and interpret it five different ways. So it’s always great to have somebody who has over 30 years, let’s call it 50 years of accounting and tax experience.
Matthew Maschler:
If I have my first, it wasn’t my first job, but my first professional job, I was an attorney like a millennium ago in the nineties and I went out and I bought a suit. Is that a business expense? No, no. I heard you talking about arguing and debating it.
Jessica Green:
So if you are, let’s say a construction worker and you need to get still toe shoes, that’s a business write off because you have to wear a particular type of shoe. Or if you’re a nurse and you get paid a 10 99, not a W2, you have to buy your uniform. That would be a deduction.
Matthew Maschler:
10 99 is an employee.
Jessica Green:
A 10 99 is a general contractor.
Matthew Maschler:
Ten nine is a general contractor. W2 is an employee,
Jessica Green:
W2 is an employee. I forget that. Confused a lot.
Matthew Maschler:
So if you’re a nurse employee, you cannot write off the scrubs, et cetera. But if you’re a nurse, general contractor, independent contractor, you can
Jessica Green:
Yes. But that’s because nursing has a specific uniform that you have to wear. I tell people that if you’re a real estate agent, you have your own LLC and you get clothes like what I’m wearing today, I have my logo on it, then I can expense that as promotional quiz.
Matthew Maschler:
So a polo shirt with a real estate company logo,
Jessica Green:
Your own business logo
Matthew Maschler:
And all my realtors are independent contractors, so there’s no issue there.
Jessica Green:
So if your real estate agent, so your team, if they wear your logo and you pay for it, then oh it’s
Matthew Maschler:
Oh, a business expense to me. Right.
Jessica Green:
Gotcha. Not to them.
Matthew Maschler:
Not to them. But
Jill Glanzer:
If they buy the shirts directly from you, maybe yes.
Matthew Maschler:
But if they go out and order shirts with the company logo on it, it’s a business expense to them.
Jill Glanzer:
This is actually really funny because years ago I was working a regular job and I went to an accountant and he’s like, oh, I can write off uniforms. I’m like, I don’t wear a uniform. I never let him do it. But I thought it was really funny because it brought that up.
Jessica Green:
Right. So if you’re an esthetician and you have to wear a uniform and you make everybody wear the same uniform, then you can write that
Matthew Maschler:
Off. See, when I was in school, I had long hair past my shoulders and after I graduated law school and I went to go get a job, I cut my hair and then I kept it short. So I always thought that my haircut should be a business expense because if I was not working this job, I’d grow it long. But no, it does not pass The
Jessica Green:
Getting your hair nails is not a deduction.
Matthew Maschler:
Not a deduction. That’s
Jill Glanzer:
Called grooming.
Jessica Green:
And also
Matthew Maschler:
Grooming is bad. We can’t do that anymore. So a lawyer buying a suit, not a tax deduction. If the suit has a logo on it,
Jessica Green:
Your business’s logo on it’s
Matthew Maschler:
Okay, arrest, professional wrestler buying ring gear. That probably would be,
Jessica Green:
That’s his business. So he needs supplies.
Matthew Maschler:
That’s a business supply. Yes. Okay. But
Jessica Green:
If you’re not wrestling and you buy gloves, clothes, it’s it’s matter. Right.
Matthew Maschler:
But if you’re buying a singlet or a leather cloak for your wrestling costume,
Jessica Green:
That’s if it’s for the costume and you’re wearing it for that, not normally wearing it for yourself personally, probably. Yes it is.
Matthew Maschler:
The problem is when we have our wrestling shows, my gear is, I wear a suit. So I bought a suit for the wrestling show, but it’s still going to be considered a suit. It’s not going to be considered ring gear.
Jessica Green:
You’re not the wrestler.
Matthew Maschler:
No, no, I am now. Well, I’m a promoter. I’m in the ring with the microphone and everything. I promote my own shows. Yeah, we just met each other. Our next show is March 17th, EPINet Israel on New Ma Road. Oh yeah, you go to be Israel, your kids are there.
Jessica Green:
I go to Bene Torah.
Matthew Maschler:
Benet Torah. Yeah, I met you at Bene Israel though.
Jessica Green:
JCCI
Matthew Maschler:
Met you at JCC. Yep. I always get everything confused. I call it SJC, some Jewish charity. All
Staci Garcia:
The Jewish
Jessica Green:
Stuff. You talked to me for 30 minutes on the Benet Israel and I were talking about Bene Israel,
Staci Garcia:
About
Matthew Maschler:
Be Israel. That’s why
Staci Garcia:
Not
Matthew Maschler:
Confused.
Staci Garcia:
Okay,
Matthew Maschler:
That’s my resident card.
Jessica Green:
But your suit is not,
Staci Garcia:
But if you put something on your suit, then it was branded, then it would be Right.
Matthew Maschler:
It has to be more of a costume.
Jessica Green:
The handkerchief that you have here branded has it right
Matthew Maschler:
Off. There we go.
Jill Glanzer:
Or if it’s like a glittery suit that you would only wear as a ring announcer, I think that that
Staci Garcia:
Like flare.
Matthew Maschler:
Well he has those robes.
Staci Garcia:
Yeah, but you could Rick flare this thing. Yeah, you could Rick flare it
Matthew Maschler:
Out. By the way, if anybody out there makes ring gear, we’re actively looking for some new sources. So anyway. Alright, so alright, so we were on a tangent from you and your stepfather arguing about what is or what is not a tax deductible. That’s how we got onto this part of the
Staci Garcia:
Conversation. I think it’s fascinating. Usually
Jessica Green:
It’s like an influencer, is the nails deduction or not a deduction?
Matthew Maschler:
If you’re filming the manicure and toing about and reviewing different nail salons,
Jessica Green:
That would be a write off because you’re an influencer, but if you’re a real estate agent, you get your nails done. That’s not a write off.
Matthew Maschler:
Even though you’re preparing for the showing. Even
Jessica Green:
If you’re preparing for the showing.
Matthew Maschler:
If you’re an influencer but you’re really, really bad at it and don’t make any money on it, can you take throw out against other sources of income?
Jessica Green:
Well if you’re not making any money, then it’s not really a business is
Matthew Maschler:
It? Well, you’re trying, I mean it takes a while to grow an audience.
Jessica Green:
Well the IRS looks at a hobby if you’ve done it for three years and haven’t made any money on it. Yeah.
Staci Garcia:
Oh, ouch. Thought that would be my Twitter, but yeah, but I’ve been on Twitter for what, since 2009, haven’t made any money at
Matthew Maschler:
It. But you don’t make any money on it right now,
Jessica Green:
Not an influencer. Yeah.
Staci Garcia:
Okay.
Matthew Maschler:
Well, I’ve been working on my TikTok for three years and I have about 17 subscribers, really, really bad influencer.
Jill Glanzer:
And if I have a hobby and I’m losing money, I can’t write that
Staci Garcia:
Off. There goes, you’re drumming too. Well, you can have
Jessica Green:
A hobby and you can try to make money, but usually after three years IRS is like, it’s
Jill Glanzer:
Okay. It’s a hobby. It’s
Matthew Maschler:
A hobby. If you lose money every year for three years, IRS is going to say it’s a hobby. So I’m going to have some problems at the wrestling show. We haven’t made any
Staci Garcia:
Money yet. You’re in a time crunch now.
Matthew Maschler:
We we’re coming on year two.
Jill Glanzer:
So exciting.
Matthew Maschler:
So have you found it hard transitioning from Dallas to Boca in your business or because neither state has a state income tax. Is it pretty
Jessica Green:
We can handle any of the 50 states and I have clients that work all over the country. I had a big network in Dallas, but I still get a lot of referrals, so it’s fine working here in Florida. And I like the Jewish Federation. They have really great programs there, so I network there.
Matthew Maschler:
Did you come to the Business and Professional Breakfast series? Yes.
Jessica Green:
Yeah,
Matthew Maschler:
That was another, that’s where we met. That’s where we met it. It wasn’t JCC, it wasn’t JCC.
Jessica Green:
No, it was
Matthew Maschler:
Federation, the I chair. Those breakfast series can’t go to the next one’s. Strong WrestleMania. That’s a holiday. It is a holiday, A high holiday. Do you have real estate agents as customers?
Jessica Green:
Yes.
Matthew Maschler:
Alright. What would you tell a real estate agent who is thinking about hiring you?
Jessica Green:
Well, there’s things that come up when you’re a real estate agent that you think that you can claim as a deduction. Usually they don’t save enough money for taxes and they just think like, well, I haven’t really made any money throughout the year and then I sold a couple of houses. And so I kind of work with them on how much money you should put each quarter. And so the fact that I’m approachable, they quite like that. I always tell my clients, please, hello, we’re here. I somehow disappeared. I usually talk to my clients. I tell them, please contact me. Do I buy a car? Do I put it in my personal name? Do I put it into the business name? I usually say put it in the business name. Even if you have to pay more in title and monthly fees because you can depreciate the car in the business, you get a bigger deduction, but a lot of the times they put it in their personal name. So it’s harder to depreciate the car
Matthew Maschler:
If you put it in your personal name, can you just put it on your books as if it’s a business expense?
Jessica Green:
Normally if you’re a Schedule C and you have an LLC, it’s better to have the car in the business name. If you have it in your personal name, you can still claim some miles, but you wouldn’t be able to claim a hundred percent because you are using that car for personal. And we like to use Mile IQ to track your miles. Usually nine out of 10 times you’re a real estate agent, you’re driving everywhere. Keep track of your miles. That’s going to be your biggest expense, I believe QuickBooks. You can keep track of your miles and you can also keep track of your receipts, but always keep track of your miles and notebooks do get lost.
Matthew Maschler:
And when you say to keep track of your receipts, you fill up the tank with gas. That’s why you’re tracking the miles because you’re trying to figure out, alright, I put 20,000 miles on my car, 12,000 of those miles were for business so that the expense of the car, the expense of the gas, et cetera, would be proportional.
Jessica Green:
You cannot take gas and miles, you can only take one or the other.
Matthew Maschler:
Right. The mileage includes the gas, the wear and tear in the car, the brakes, the tires, et cetera.
Jessica Green:
Yeah. The miles is normally, I believe it’s 65 cents the mile.
Matthew Maschler:
You could take the payments, the car payments and the miles,
Jessica Green:
Not if it’s on the business name. You can’t take the car payments.
Matthew Maschler:
Alright. So it has to be in the business name to take the car
Jessica Green:
Payments. You can take the interest of the car, not the actual car payments.
Matthew Maschler:
Gotcha.
Staci Garcia:
It’s a lot to know as an accountant and I’m glad I’m not one. It’s a lot of information. Right. It is just like real estate is you just don’t realize it. You do it Well, when I went to University of Maryland, I was pre accounting freshman year. Oh wow. But the building was too far away from my second year location, so I changed
Matthew Maschler:
It. There was an agent last year that sold a $4 million house, got $120,000 commission, and then you start thinking, okay, he’s going to have a big tax bill. If he doesn’t think about that or plan for that, that’s going to be an issue. That’s why he’s got to have to start thinking about his mileage and his other business expenses because there’s a big expense. And at signature, the real estate broker, we don’t withhold for taxes. Right. Employers withhold for taxes, but you get your real estate commission, that’s a check and
Jessica Green:
You spend
Matthew Maschler:
It, you spend it, right?
Jessica Green:
So the miles is actually 65 and a half cents in 2023. 2024 is 67 cents to the mile. And when you get a big check from selling a house, I say put 20% away.
Matthew Maschler:
20%.
Jessica Green:
And if you are making, let’s say over $200,000 a year, 30% just to be safe, and if you can try to pay the IRS quarterly,
Matthew Maschler:
Go on a quarterly schedule so that way
Jessica Green:
You’re paying your taxes throughout the year and you’re not hit with a $40,000 IRS bill
Staci Garcia:
And you’re not tempted to spend it.
Jessica Green:
You can keep the money if you want in a high savings account, accruing 1%
Matthew Maschler:
Interest rates are up. You can find three or 4% nowadays
Jessica Green:
Depending on which bank. Yeah,
Matthew Maschler:
You got to look for it. But that’s a really good piece of advice. So you also said real estate investors. Yes. What does a real estate investor have to know different than a real estate agent?
Jessica Green:
Well, real estate agents help other people buy and sell properties. So sometimes the real estate investor does it for themselves and maybe they have a full-time job and then they try to say, well, I’m a professional real estate. And I’m like, no, you’re not. You have a full-time job and you’re making a lot of money. So how are you going to prove it? Typically, if you don’t have a full-time job and you’re just doing real estate investing, that could be buying and selling. Buying and holding Airbnb is a big one that I get. I always get questions like if I’m doing Airbnb, is this considered a rental or is it considered a business? And I usually put it as a business so that you can claim the income and losses against your W2. But if you’re a real estate,
Matthew Maschler:
If you classify it as a business, the business expenses, they don’t have to match the income from that business. It can match the income from other businesses.
Jessica Green:
It can match your income from your W2. So if you make a massive loss, probably due to depreciation, it will offset your W2 income. And if you earn under $140,000 and you earn property, you can also claim the losses on your tax return. And that’s how people pay zero taxes. It’s a way to help people pay the zero taxes. And that’s why a lot of people want to become real estate investors. Usually you have to spend around 750 hours, but you have to spend quite a lot of hours and maybe become a broker just to become a real estate investor.
Matthew Maschler:
So that way the IRS considers that your
Jessica Green:
Job main job. So if you have a full-time job making $500,000 a year, it’s going to be really hard to say, okay, you’re also a real estate investor, then what are you doing in your day job? There’s a lot of hours and time that you actually have to spend. You have to prove it.
Matthew Maschler:
So if you have a day job and on the side you do some real estate investing, what is the difference between in the taxes on that versus if you are a full-time real estate investor, what changes?
Jessica Green:
So if you have some properties, but it’s just maybe you inherited it or you’re just trying to build some wealth in a different way and your own property, if you make income, then you pay the taxes on it. If you make a loss, it gets carried forward until you start to make a profit. So you can’t deduct those losses on your tax return because you’re not really a real estate. You have real estate, but you’re not a real estate
Matthew Maschler:
Professional. So I know plenty of people that have a day job, but then they have maybe one or two or three rental properties or an Airbnb or maybe up in the Disney area. They have those vacation rentals that they put in the hotel pool. So they’re not professional real estate investors so that they have the income that they have to be taxed on, or if there’s a loss, they can’t match that loss to other businesses that they have. They have to carry
Jessica Green:
Forward. Well, so if it’s real estate or passive income and one property makes a huge profit and the other two properties don’t make any money, then that profit offsets the businesses. The other real estate that hasn’t made any money or a lot of money. And so let’s say in total you made a loss, then that gets carried forward. But if you made money, then you pay taxes on it.
Matthew Maschler:
Gotcha, gotcha. And what’s important to note here is all of these situations are unique, right? Each person’s individual business and their investments will get different advice and that’s why you need an advisor to figure out what it is that you are doing and how do you structure it better so that way you can minimize your losses or maximize your deductions.
Jessica Green:
And a lot of times I see real estate agents give their clients $500 towards something, and the gift tax rule is $25. So anything more than $25 is really not a deduction on your tax return. You’re only technically supposed to do $25. So you can go to a store, like a fancy store and buy a bunch of gift certificates that are $25.
Matthew Maschler:
So if I got you a $100 gift card, I’m not going to, but if I got you a hundred dollars gift card that said, thank you for joining me on the podcast today, there’s some kind of tax involved.
Jessica Green:
You’re only allowed to claim $25 of that a hundred dollars as a business write off.
Matthew Maschler:
I can only claim, so that a hundred dollars is not a business expense. I can only claim $25 as a business
Jessica Green:
Expense. So you would give me a $25 gift card.
Matthew Maschler:
I’d have to four of
Jessica Green:
Them, or you can get four of them. The IRS is not going to track.
Matthew Maschler:
Right. That’s what I was going to ask. How many,
Jessica Green:
They’re not necessarily going to track if you gave somebody one card or five cards, but they can track that $100.
Matthew Maschler:
Oh, interesting. I was going to ask you, how often can you do the $25? Is it every day or once a year?
Jessica Green:
The gifts is just increments of 25. Increments
Matthew Maschler:
Of 25. So I did a deal recently with Texas Roadhouse where I gave them, I bought $2,000 worth of gift cards and they put a billboard, an ad in the Texas Roadhouse with my name and picture and phone number website. So I thought it was a great deal. I got back to $2,000 worth of gift cards. So it was almost like it was free for the billboard, except that not really free. I’m now restricted, I have to use this money at Texas Roadhouse. I did it in two different Texas roadhouses. So in one Texas Roadhouse I asked them for, they gave me the gift cards and increments of $25 and I got a big stack of them and I thought to myself, well, that’s a gift. That’s not going to be enough to buy dinner for two. I’d rather $50 gift card. So the second time I did it, I got a $50 gift card. I thought that would be a better gift to pay for someone’s whole meal, assuming they’re not eating a loan at Roadhouse. The charge on my credit card is the same.
Jessica Green:
Your example is not a great example because it’s advertising. You’re really advertising with them and then they’re giving you back the gift card. So you can use the gift cards to reif it as a promotion, or if you take people out, you can use the $50 and get the meal deduction. I was just
Matthew Maschler:
Trying to think,
Jessica Green:
But it’s more like if you sold the house to somebody and you bought them a $600 chandelier,
Matthew Maschler:
Then there’s,
Jessica Green:
And it’s really the gift for the client is really $25 that you can write
Matthew Maschler:
Off. So if I gave a closing gift to a client, that’s not a business expense because if it’s over $25, it’s not technically a business
Jessica Green:
Expense. The rest of it is not really a business expense. But that’s why, I mean, there’s all different types of closing gifts, but if you put your logo on it,
Matthew Maschler:
And then these gift cards had my logo on it.
Jessica Green:
So if you buy a gift basket and you buy 10, fill it up and you buy bulk of it, and then you put your card in there, you can have that. You can write off the things that you bought in there. That’s
Matthew Maschler:
A good idea. There’s marketing. What about if I, let’s say I represent the buyer and there’s a $5,000 commission and I rebate my customer of $500 of that commission.
Jessica Green:
That’s just the sale of the house. It’s not a gift.
Matthew Maschler:
It’s not a gift to them because
Jessica Green:
Having that contract that,
Matthew Maschler:
Well, if it’s not contract based, if I do it out of the goodness of my heart, I just credit them $500 at the closing table and I say, it was a pleasure doing business with you. Maybe
Jessica Green:
It’s not a gift. It’s
Matthew Maschler:
Not a gift. You know what I always wanted to go,
Jessica Green:
We had that situation where we bought from the agent who sold the house. So they gave us back like $3,000.
Matthew Maschler:
Not a gift,
Jessica Green:
But you’re allowed to give people 14,500 not claiming on the tax return.
Matthew Maschler:
Right. Oh, see, I see. I never received the money, so I don’t need a deduction. Right,
Jessica Green:
Right. It’s not a deduction for you. Right.
Matthew Maschler:
In my example,
Jessica Green:
Well, you got the money, but then you,
Matthew Maschler:
No, my example, the reason there’s no taxes. I never received the money. I was supposed to get 5,000. I didn’t get 5,000. Now I only got 4,500 and
Jessica Green:
500,
Matthew Maschler:
500 went to the buyer. So I think it was a gift, but there was no deduction because I didn’t receive 5,000. I only received 4,500. If I received the 500, then I deduct the 500 and then I’d give the 500. That’s why it’s not a gift there. I see that. I’m going to ask you a question. This is something I thought of for a while and I never asked anyone.
Sometimes I buy properties for myself. I’m an investor. I saw the one we listed this week. It’s a property that I bought for myself. So at the closing, I said, instead of taking a real estate commission, let’s say it was a $500,000 house, so it would’ve been a $15,000 buyer commission. So instead of taking that 15,000 as income, I had it credited on the closing statement and I paid $15,000 less for the house than I would’ve, even though the price of the house on the closing statement says the same thing. It says $500,000 house. So I carried on my books for 500,000. There’s 15,000 that I didn’t pay, is that 15,000? So if I would’ve taken that as income as a commission,
Jessica Green:
Well, you sold the house at $500,000.
Matthew Maschler:
I sold the five. That’s
Jessica Green:
What it says
Matthew Maschler:
Entitled. I sold the 500,000 house. To me, I didn’t take the 15,000 as income. I had it credited to the purchase price.
Jessica Green:
So it’s just part of the down payment.
Matthew Maschler:
I would’ve paid $15,000 less, even though it’s on my books, it’s 500,000. I just didn’t pay the 15,000. I didn’t pay 15,000 of it. So I didn’t take that 15,000 as income.
Jessica Green:
You’re just moving money from one place to the other place. So somewhere that $15,000 is going to get recorded.
Matthew Maschler:
I see. Because when I sell the house, I say the purchase price is 500,000. Right? Yeah. But I see what’ll happen down
Jessica Green:
When you sold it for $500,000. You didn’t actually take the $15,000, but you did.
Matthew Maschler:
Gotcha. I see
Jessica Green:
It. And that’s off of the real estate on selling the buyer side.
Matthew Maschler:
Right? Right. Okay. Sometimes it just takes talking it out to see it. Right
Jessica Green:
Or not. It’s confusing because it’s yourself and yourself. So it’s like, but I didn’t take my 15
Matthew Maschler:
Every time. I see. But
Jessica Green:
You did because you paid $500,000. You didn’t pay $15,000 less. It says
Matthew Maschler:
Every time I see it where a real estate agent just credits their commission for their mother or for their sibling or something. I always wonder, I’m like something, is that getting around the IRS or something? Is there something there that the IRS should have seen and didn’t? Because usually I find that the IRS always gets their money, right. If there’s a tax break, it’s the government telling us they want to do something. Right. So complying with the law and setting up accounts and investments to comply with the law and pay less taxes is just complying with the law. But at the end of the day, IRS always gets what they’re entitled to or mostly. So every time I see a little, I don’t want to say loophole, but tweak a bug in the system, I always wonder, but every time I get to the bottom of it, it’s always No, it’s always the iris gets their money.
Jessica Green:
If you sell your personal house and you’re married, filing jointly, first $500,000 is not taxable. Two 50 personal. If it’s an investment, you’re taxed.
Matthew Maschler:
Right.
Jessica Green:
Then it’s my job to help lower that taxable income by coming up with expenses.
Matthew Maschler:
Right. The taxes that you paid over from, so even
Jessica Green:
Though you didn’t take that 15,000, so the house got $500,000, but you didn’t take the $15,000, but on paper you probably you did. Right. So then on yourself for your business, you deduct the real estate. 15,000. Got
Matthew Maschler:
It. And something that you just said was very important. One of the biggest tax breaks in real estate is the residential capital gains on a residential real estate. So don’t you tell us what that rule is again.
Jessica Green:
So if you’re single, the first $250,000 of your primary resident, you have had to live in there three out of the last five years.
Matthew Maschler:
Three out of the last five years,
Jessica Green:
You have to have lived there for two. Yeah, three out of the last five years, or two consecutive years.
Matthew Maschler:
Two consecutive years, or three of the last five years. Yeah. Okay. So you buy a house,
Jessica Green:
So you can live in a house, and then you can live in your house for a couple of years and then leave and then go back. And as long as it’s your primary residence.
Matthew Maschler:
So our friends in New Jersey, they keep their house or they buy a house on the shore, move to Florida and rent it out.
Jessica Green:
Which one are they renting out? The Jersey.
Matthew Maschler:
Jersey. They leave Jersey. Keep the house, rent it out. They could do it for first year, they could do it for the second year, but after two years, they want to really think about possibly selling that house because if they don’t, they’re going to lose that benefit of the capital gains on primary residence because eventually that will stop being their primary residence.
Jessica Green:
Right. The house in Florida is their primary resident.
Matthew Maschler:
Right? They can become the house in Florida for two years. The house in Florida is the primary residence, but that house in New Jersey, when they sell it, they will have that benefit if they lived there for three of the last five years. So they can rent it out for about two years, but then they have to sell it to capture that capital gain. Otherwise they’re going to lose that benefit. And regardless of how much money they’re making on the rental, paying the capital gains on a $500,000, paying capital gains on $500,000 worth of income is a lot of money. Right. Do you deal a lot with 10 31 exchanges?
Jessica Green:
I have done a lot. Some with cost eggs and 10 31 exchange.
Matthew Maschler:
What was the first word you said?
Jessica Green:
Cost
Matthew Maschler:
I Oh, cost egg.
Jessica Green:
No. Cost segregation.
Matthew Maschler:
Cost segregation. Yes. That’s different than 10 31 exchange? Yes. What is cost segregation?
Jessica Green:
So a 10 31 exchange is when you buy a house or a building and you’re a real estate investor, not your primary residence. And let’s say it’s worth $500,000 and you want to sell it and not pay capital gains tax on it. You have to find a property within a certain time period that’s either a house of $500,000 or greater and within, I believe 90 days. And then you sell that house, buy another house. Or it could be a multifamily or it could be, usually it’s multifamily or a complex or a commercial property.
Matthew Maschler:
To keep it simple, you are selling an investment property and using the proceeds to buy a replacement investment property. And because you’re doing that in a certain way called the 10 31 exchange, you don’t have to pay the income tax on the sale. If you were in the stock market, if you were selling your shares of Apple in order to buy shares of Microsoft, you pay capital gains tax on the sale of the apple, but only in real estate. Can you do this thing called 10 31 exchange where you can buy an investment property, sell it, and hold the proceeds, roll it into the new investment property and not pay capital gains on the sale because that money is still invested.
Jessica Green:
Yes. Okay.
Staci Garcia:
But in the capital gains, you can’t live in it. Right.
Matthew Maschler:
10 31 exchange is for an investment property. It’s not for residential real estate. Residential real estate’s better because you have that capital gains exclusion that we talked about. Two
Jessica Green:
50, you mean your personal, you can do a 10 31 with a residential property, but
Matthew Maschler:
Usually it’s you’re not living in,
Jessica Green:
You’re not living in it.
Matthew Maschler:
Stacey’s question is you’re not living in it. You’re not living in it. It’s an investment property.
Jill Glanzer:
I know somebody who bought, who did a 10 31 exchange and bought a second home for themselves. They don’t live in it full time. They may come down every now and again, but they’re not going to be living in it for two more years.
Matthew Maschler:
Do they rent it out?
Jill Glanzer:
They don’t. And I need to ask him to rent it. I need to ask him if he wants to rent it out. I was just thinking that because if he did that, he should be,
Matthew Maschler:
The rule
Jill Glanzer:
Is it’s an investment property.
Matthew Maschler:
The rule is you’re selling an investment property and you’re replacing it. You’re buying another investment property.
Jessica Green:
They could technically rent it out though. If they wanted to,
Matthew Maschler:
They should rent it out. Is
Jill Glanzer:
There a reason why he would just let it sit there for two more years until his kids can go to school down here? That seems kind of like a waste of money. The reason
Matthew Maschler:
Is it cheated?
Jill Glanzer:
Oh,
Matthew Maschler:
He cheated. He did not to buy an investment property. He sold an investment property and he used the proceeds to buy
Jill Glanzer:
A house that he will eventually live in, which is really not the way 10 31 exchange should be done, but he kind of cheated. Okay, got you.
Jessica Green:
Unless he bought it for his kids who if they go to college down here it from him.
Matthew Maschler:
Okay. But they have to rent it from him. Right.
Jill Glanzer:
Got you. That is so interesting. I’ve had a few people, I had another guy and he wanted to buy a second home. He was going to do the same thing, but he didn’t wind up doing it
Matthew Maschler:
Because that’s
Jill Glanzer:
Illegal. I know.
Matthew Maschler:
Now what you said, I thought it was weird. Well, you said before is the property’s vacant. You should suggest to him that he rents it out, right? Yes. It’s a good realtor, right? Yes. You should suggest to him that he rents it out. And if he says no, you might want to remind him that one of the reasons he bought this investment property was to rent it out and it would not look good that he didn’t rent out this investment property. And
Jill Glanzer:
I just did a podcast with an accountant, a tax accountant, and I was reminded of this. So that’s good.
Matthew Maschler:
That is awesome. That is awesome. So if one of my real estate agents, they want to contact you, one of our investors wants to contact you. How do they get ahold of you?
Jessica Green:
My email address? Well, my business is Green Tax and Business Advisors
Matthew Maschler:
And Green Tax and Business Advisors
Jessica Green:
Spelled out. And so it’s a very long name, but green gives you money. So you can’t forget Green.
Matthew Maschler:
Is that how you came up with the name?
Jessica Green:
No, that’s my last name. I’m Jessica Green. Okay.
Jill Glanzer:
But it’s very convenient. Yes,
Jessica Green:
Yes. Before we go, I also wanted to say you can do a cost study. So if you buy an investment property and you’re going to hold it for a while, usually more than three years, and it’s better if it’s worth more than $500,000, you can take bonus depreciation, bonus depre, and accelerate or celebrated depreciation. And instead of depreciating your full house, let’s say over 20 or the commercial property over 39 years, you’re able to break it down. But it’s a whole engineered study that you have to do. And there are rules and regulations around it, but it really significantly saves money.
Matthew Maschler:
Let’s say. I didn’t understand that, but who do I recommend that to? Investors,
Jessica Green:
Real estate investors who are buying and holding property. So if you’re buying and flipping or if you’re doing land or then that’s
Matthew Maschler:
Not. But if you’re going to buy and hold and turn it into a rental or an Airbnb, they need to talk to Jessica about cost segregation. Yes. Alright. What about the thing where if you buy a, I remember when the Cadillac Escalades were popular, what about the thing where you buy Cadillac Escalade and there’s special tax deductions for it,
Jessica Green:
Your car has to be over like 8,000 pounds and then you’re able to depreciate 80%. So it changed this year.
Matthew Maschler:
Gotcha. So does it have to be a
Jessica Green:
Truck? And you really don’t want to buy a car every year, but
Matthew Maschler:
Does it have to be a truck?
Jessica Green:
It has to be a certain weight. It
Matthew Maschler:
Has to be a certain weight, yes.
Jessica Green:
Usually it’s a truck.
Matthew Maschler:
Right. But if you buy a big Rolls Royce that’s over the same weight
Jessica Green:
You can, it has to be a weighted car. So has be a big car.
Matthew Maschler:
I know people in town and
Jessica Green:
Real estate professionals do drive a lot. So that would be a legitimate expense.
Matthew Maschler:
Yeah.
Jessica Green:
Wow. I mean, it doesn’t mean you have to drive a Rolls-Royce,
Matthew Maschler:
But I’ve seen people buying big Rolls-Royces on using this depreciation method and it’s like it’s a good business car. Yeah, it usually pick up trucks, but yeah. Easy. So that’s awesome. So anyway, if you are a signature real estate agent, Jessica is a preferred vendor. So you can just go on the company’s website, the signature contact sarah.com website. Under the preferred vendors, Jessica’s there as a preferred signature vendor. Otherwise, you can reach out to Jessica directly or reach out to me, Stacy or Jill, we can put you in touch with Jessica. You will save a lot of money. And saving money is as good as making money.
Jill Glanzer:
Yeah. Thank you. Yeah, thank you so much. That was so insightful. Really helped me understand a lot.
Jessica Green:
Thank you very much for having me. I appreciate it.
Matthew Maschler:
Thank you. All right, we’ll talk to you again after April 15th. Yes. Alright. All right everybody, this is just a reminder. Go do your taxes.
Speaker 5:
The future looks bright and the storms pass by the sky’s dog. Blue. When it’s almost at time, light shows. Cameras flash when I pass. Living in the moment, forget about the pass. They saved the best for last. Matthew Mania. We about to make a splash. Life is a marathon full of sharp turns. Got to keep pace while the hands on the clock turns high stakes. Five Star Estate. I run a show. You can tell the boss, center plate electricity, energy. I’m always on time. Even I make dreams. Come living my life real.
Speaker 6:
You know, knows time. You know. You know what you know. You knows. You know what it what
Speaker 5:
Time. You know time. Know what time it’s, man. You know what time it’s, you know whose time it’s, you know what time it’s man. Yeah. Got him shook, scared. Can’t look. We not afraid of the big.