High Taxes for W-2 MD's?

[mille125]

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Here again is somebody skewing the numbers. I can speak to living in high state and local tax environment but looking purely from a federal tax standpoint a single person with no deductions that makes 775K would have 243K in federal taxes withheld which is roughly 30% of all income. Again this does not take into account the standard deduction or any deductions including health care, medicines, charity, etc. When factoring those you are in the mid 20s. There is legislation now that a lot of state and local taxes can be deducted up to 40K, I believe, instead of current 10K.

You would also get additional deductions in most cases if you have another LLC (maybe consulting or something) or are involved in real estate or other retirement plans.

 

[mdo1738]

There is legislation now that a lot of state and local taxes can be deducted up to 40K, I believe, instead of current 10K.

The SALT legislation you refer to is phased down at incomes over $500k. It’s $40k for those up to $500k income, then $30k for $520k I think, etc, until at $600k you are back down to the old $10k limit. They are going to be raising it a small percentage for everybody over the next few years, until 2030 it will return to $10k for everybody (though obviously new bills by that time may change that).

 

[mille125]

The SALT legislation you refer to is phased down at incomes over $500k. It’s $40k for those up to $500k income, then $30k for $520k I think, etc, until at $600k you are back down to the old $10k limit. They are going to be raising it a small percentage for everybody over the next few years, until 2030 it will return to $10k for everybody (though obviously new bills by that time may change that).

Thanks for clarification. I live in a zero state/local tax so I haven't followed closely.

 

[drusso]

Avoid W-2 arrangements at all costs. It's just throwing money down the drain. Pay yourself the IRS minimums and make yourself someone else's overhead.

 

[SpineandWine]

has anyone done short term property rentals with cost segregation study?

 

[maxxor]

Avoid W-2 arrangements at all costs. It's just throwing money down the drain. Pay yourself the IRS minimums and make yourself someone else's overhead.

Just to be clear, you pay yourself 169,000 and take the rest as K1?

 

[giddyup]

has anyone done short term property rentals with cost segregation study?

Me. Worked as advertised.

 

[SpineandWine]

Me. Worked as advertised.

Can you please discuss (or PM me if don’t want to share public)- approximately what you did and how you went about it
- was your rental property in area you lived or in tourist town elsewhere
- who did your cost segregation study?
- did you use that rental to buy other rentals?

 

[giddyup]

We recently moved across state lines. We kept our old house and turned it into a short term rental as it was close to downtown in a very popular area. We moved in September so I self managed it through the end of last year and racked up the required 100 hours to show material participation. I have all of those documented in a Google spreadsheet with the date, the amount of time, and the specifics of what I did just in case I get audited. I had the cost segregation study done by Engineered Tax services and Kim Lochridge. She was very good to work with and I had multiple calls with her. Unfortunately last year was a year of only 60% bonus depreciation which is a shame because it’s back to 100% this year. With the tax break I looked into other short-term rentals, But decided to do some other investments instead. I’m on the fence about buying another short term rental this year and doing the same thing with the 100% bonus depreciation but the short-term rental market isn’t as good as it used to be and the upkeep on more luxury properties like our old house is a bit of a Hassle. Feel free to PM me with other questions or ask here.

 

[Agast]

We recently moved across state lines. We kept our old house and turned it into a short term rental as it was close to downtown in a very popular area. We moved in September so I self managed it through the end of last year and racked up the required 100 hours to show material participation. I have all of those documented in a Google spreadsheet with the date, the amount of time, and the specifics of what I did just in case I get audited. I had the cost segregation study done by Engineered Tax services and Kim Lochridge. She was very good to work with and I had multiple calls with her. Unfortunately last year was a year of only 60% bonus depreciation which is a shame because it’s back to 100% this year. With the tax break I looked into other short-term rentals, But decided to do some other investments instead. I’m on the fence about buying another short term rental this year and doing the same thing with the 100% bonus depreciation but the short-term rental market isn’t as good as it used to be and the upkeep on more luxury properties like our old house is a bit of a Hassle. Feel free to PM me with other questions or ask here.

Have you thought about long term rental for your property?

 

[mille125]

Avoid W-2 arrangements at all costs. It's just throwing money down the drain. Pay yourself the IRS minimums and make yourself someone else's overhead.

I agree but most pain docs work for a group, are in academics, or employed in an HOPD

 

[mille125]

Just to be clear, you pay yourself 169,000 and take the rest as K1?

169K for a pain doctor may not pass scrutiny of an audit...

 

[giddyup]

Have you thought about long term rental for your property?

Yes. Numbers don’t work.

 

[Ducttape]

Thoughts on investing in oil drilling? I hear this is 100% tax deductible for W2 employees and typically nets 8-15% return rate

the trend in number of oil rigs has gone down recently.

might not be a good idea to invest at the moment. we have the same number of rigs now as in Aug 2021 from a peak in Nov 2022.

as gas prices trend downwards, the number of oil rigs will most likely decrease.