It's time to start thinking about taxes if you own a small business or invest in real estate, so we got one of the best CPAs we could find on this week's episode of Real Estate Investing Unscripted.
Ana Karina Klein has her own Accounting business: AKK Tax and Accounting LLC. But Ana isn't your typical CPA: She's a real estate investor herself who has the best interest of other REI small businesses in mind. We got on the podcast with Ana to talk about playing the IRS game, using social media to boost your own small business, and much more.
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REI:U 21 Ana Klein
Brendan: Welcome back to another episode of Real Estate Investing Unscripted, where we get real with real estate investors and other experts throughout the industry. I'm your co host, Brendan Bennett, and with me is your other co host, David Duggan. And David, today we have a very special guest.
Her name is Anna Klein, also known as Anna K CPA, and she's going to be dropping some tax and accounting knowledge on us today.
David: Yes, uh, excited to have Anna on the show. Anna, welcome.
Ana: Hi guys, thanks so much for having me nothing like being here on october 11th, five days before the deadline
Brendan: Oh man.
David: didn't even think about that. Well, thank you for carving out some time for us. That's awesome.
Ana: Of course!
Brendan: So, uh, Anna, as we kind of get into it, if you wouldn't mind just giving the listeners a little bit of a background of, uh, who you are, what you do, and I know that your path to get into the CPA world, uh, was a little bit unconventional. So talk about where you started and how you landed where you're at now.
Ana: Yeah, absolutely. I went to, I'm originally from Wisconsin. I currently live in Austin, Texas, but I lived in Wisconsin and my mom was an accountant when she lived in Mexico. I was born and raised in Mexico. So I was like, okay, that's easy. I'm just going to be an accountant, all that stuff. Went to college. Partied my little butt off like so bad, but my parents were super strict, so they didn't let me do anything. So when I got to college, I went wild, but that's a story for a different day. Um, so anyways, I didn't do well. I ended up not dropping out, but I left. Um, Madison, which is the University of Wisconsin, as many of you guys know it.
And I ended up going to a different college because I didn't want to wait anymore. My grades were literally like a 2. 4. If that, I don't even remember. did the track like everybody else did. And then I went to public accounting, which is what every accountant, you know, aspires to be just getting into public accounting.
And I got there and I was like, this. sucks. Like you're working 90 hours a week. And you know, when you divide it into actually the like how much you make, you don't make any money. That's nothing. Um, you had no work life balance. Um, I was young and I was like, I'm not doing this. I lasted literally three months.
I didn't even make it through busy season. And I was like, okay, I'm just going to be a CFO somewhere else. So decided to go private. I'm like, this is going to be better. Same thing, nine to five. You still have to ask for permission. And I was like, this is just not the life for me. And one day I was just like, I'm just going to up and quit my job and open on my own business.
And I did that in 2016. I was just like, whatever, I'll see what happens. Um, my parents got my back and it sounds. It's easy, but it was not, it was really, really hard. It was, I remember going to back in the day, social media wasn't so strong as it was. So I would go, my parents, um, co owned grocery stores in Wisconsin.
So I would wait outside the grocery store after I had my part time job with business cards and anybody that would walk by and say, Hey. Can I do your taxes? Can I do your taxes? so it's a very it's like now that I talk about it. It's actually very it feels different to know where I started and um what i've had to go through to start where I am
David: So Anna, that's a, that's a gutsy move, right? I think it takes some, some big time guts to make that jump from a secure full time position with benefits and you know, all the bells and whistles to now you're on your own. You're doing your own thing. What allowed you to make that jump? What encouraged you to make that jump and gave you the kind of the, the courage to make the leap of faith?
Ana: Yeah, it's really really hard. I would say anyone who wants to you know, start their own business is worth it but It is a lot of work. And I think I just saw my parents. They are entrepreneurs. So I saw their struggles and it was hard for them, but I also saw where they were now. And I always looked at my mom.
She was a single mother of two kids who literally came to the United States and lived the American dream. So I was like, if she can do it. And she had me when she was like super young, 17. I was like, I'm here. I can do it by myself. So it really was just. Seeing my parents and realizing that if my mom could do it like I could do it.
Brendan: So Anna, when we talked last, I think you said, uh, and correct me if I'm wrong here, around like 70 percent of your customer base is real estate focused. Is that correct?
Brendan: Okay. So what, what drew you to that specialty? Obviously you could have picked a ton of different ones. You, you said corporate tax accounting exists.
There's a ton of different, niches available. What drew you to the real estate domain?
Ana: Yeah, that's a great question brendan because when I started doing taxes I was doing them for anyone who trusted me. I was like, whatever i'll take you right and then when I got into Really? Looking at the numbers, I started working with a lot of high net income earners, you know, dentist, anyone who made over two 50.
And then I [had also a lot of people who owned rental properties and I started doing the comparison between the two of them. And from a percentage based, the real estate investors were paying less in taxes And I was like, what the heck is happening here? And that's when I literally just like emerged myself into anything
David: So when you did that, had you owned any real estate prior to that? Or did that kind of spark your interest in creating your own portfolio and building in real estate?
Ana: Yeah, no, I didn't own real estate, never even thought about it. but that's when I found kind of like a lot of people do bigger pockets. Right. And that's when I was like, Oh my gosh, this is a whole different world. so I probably would say after two years of being in the business and doing real estate and realizing the tax benefits that they have.
I went and bought my first rental property.
David: I think that's a common story. Uh, at least so we see it within our own four walls here of our office. Uh, we, we have a lot of young, really smart people that, you know, leave college or whatever their previous profession was. And they come to work here and then they're kind of immersed in this real estate culture and they find, all of these interesting strategies and they meet these really cool people and they start to build a network and all of a sudden it's like I I am silly if I don't try and do this myself, right, or take that leap and start buying property or building my portfolio or, you know, flipping properties, whatever they want to do.
And, I was in a previous career that also dealt with real estate and I saw it there as well. I think it's one of those, it's one of those niches that if you are in, you kind of immerse yourself in that culture. And, uh, anyway, it's a story that's all too familiar with us, but obviously it's a, it's worked out well for you.
Ana: Yeah, I think to your point, David, it's you are who you hang out with, right? So like when you start being in these rooms with these people who are buying commercial real estate or flipping or lending You're like wait, I should be doing the same thing too because my motto is like if it's not broke Don't fix it, right?
Like follow whatever the wealthy people are doing. How did they get there? Okay, that's what I need to do. Don't try to like reinvent the wheel So, I did go ahead and i'm on my third rental property we recently purchased property management company. So now it's more of like, okay What else should I be doing?
You know, you're always in like what else can I do now? I lend now I you know dive into dive into everything
Brendan: That's very cool. And I would imagine as you're doing, as you're performing tax services for your customers, you're learning of those new opportunities as well. Right? So you meet with someone who's a private lender. You're like, Oh, like I can do that. You know, I can copy and paste that strategy and just kind of continue to iterate that with the more people that you meet with.
Ana: Yeah, the private lending business You know, as you guys know, it's really great business that I really didn't know. And it's amazing to see my clients do it. And every, and it's a great network because they get to learn from me. I get to learn from them. And then I connect them with other clients who are like, Hey, they're looking for money.
Or, Hey, this person in California is selling this. So it's a great network to be in, but also learn from people who. are way more advanced than I am.
Brendan: I love that. Anna, can you give us. Uh, a quick idea of like, who is the prototypical customer that you deal with? So like, do they own a hundred rentals? They own two. Do they have a commercial complex or, you know, what kind of things do you typically see for the people that you serve?
Ana: Yes, great question. So we really try. My biggest thing is education. So we really don't turn people down. I'm like, oh, you don't qualify. However, what I will say is that everybody starts with one. And I've been with clients who start with one and now are in their commercial buildings. So we really want to work with the client.
Who wants to actually invest in education and learning about taxes, not just someone who is looking to, and there's nothing wrong with us. If you're like, Hey, how much is it going to cost me to prepare? It's like, we're not the right type for you. We want you to grow with us. And I want to teach you how to play the IRS game.
So our clients really range from people who have one property who are just starting to people who have, um, commercial buildings, their syndicators, they have hundreds of properties. So it's really is. Do you want to work with us and do we want to work with you to make sure that you get the value out of it?
Brendan: Yeah. And Anna, you mentioned too, I was going to wait to get into this, but I think this is kind of relevant based on what you just said, you guys offer a tax preparation service, but you guys also offer like a much more tax planning and strategy. Can you just quickly cover that a little bit to give people an idea?
However, it's a million dollars, and you have you need to
Ana: Yeah, that's a great thing that people don't know about. So there's a difference between tax preparation and tax planning. And when you're in a W 2 job and there's apps, like I said, nothing wrong with it, you use TurboTax. You drop, you do your, it's so easy and it's like a hundred bucks. So I always encourage people to do it themselves.
Right. But when you start having investment properties or you start being a business owner, there are two things that you need to be doing. Of course, your tax preparation, which right away I talk about price right away because that's like the elephant in the room that I don't like to hop. You go from TurboTax to using a good accountant.
10 extra fees. However, it's an investment that you're making. But at that point, so like right now is October 11th. [ There's nothing we can do for you for 2022. Like it's, if you owe a million dollars, well, you should have been here a year ago having this conversation, right? And I tell my clients that all the time, like, where have you been?
Like, it's literally four days before the deadline. There's nothing I can do. That's where tax planning really comes into play. And if you have a business, any type of real estate, um, I have a lot of People who are not in real estate as well. You need to talk to your CPA throughout the year because things change throughout the year and there's time to play the game throughout the year.
Not on December 31st when you're trying to run and buy the car that you want so you can deduct it. So there, it's a huge difference when you have a business and you have to treat it as a business. But I will say that it has been our fault as educators because we don't educate everyone enough on what the difference is between tax planning
and tax preparation.
David: And how do you go about that? Is that kind of a consultative approach where you're sitting down with them in your office, you know, and kind of, you know, scheduling frequent meetings with your, with your customers so that you can provide that education? Like how, like, is there some people that you meet with more than others?
What does that look like?
Ana: Yeah, so we have in our firm different types of services. We're kind of a boutique service, right? So it's like if you only need one call a year, that's cool. We have only one call a year, but we have clients who are like, no, we need to talk to you every quarter, which is great because those are the clients with who need more handholding, not only, but their portfolio is a lot larger that things change all the time.
So we do have schedule with clients. every quarter. We also have unlimited access. So whenever our clients have questions, they can email or text us because that's the biggest thing. Like, let's say next week, you're like, I really should buy a car. Okay, well, there's a huge difference if you buy a car that's under 6, 000 versus not over six versus over 6, 000.
That could cost you 100, 000. so we're like, I always say like we're Google, but you have us live. So it really depends on what your needs are. And if it makes sense, we'll work
David: One of the other things I'm curious about with your business, we spoke earlier about your, growth on social media, right? And how you leverage social media as a tool to grow your business. And I would love if you could touch on that as well, but kind of an additional piece of that question. what has that allowed you to do as far as, the geographic span of your client base, right?
Do you have clients all across the country? Are they specific to Texas? And, you know, if they are across the country, does that require you to understand state tax law a little bit deeper in those states where your customers are?
Ana: Social media, as you guys probably know for anything, just as [00:12:10] long as you utilize it, it's a huge leverage. I mean, it has probably doubled our business every single year. I love it, but I hate it. It's a lot of work. It's a lot of scrutiny. Uh, and I mean, I don't have a lot. I mean, I have followers, but I can't imagine people who have like millions of followers, all like the trolls that they get.
Like sometimes I get trolls and I'm like, I clap back. I'm like, no, let's go. Like, all right. But I can't imagine people having all these followers. So social media is a great tool. and for me, I just try to be very, very like myself. Like I'm not going to bore you all the time with real estate. Like last weekend I was at a party drinking and I was like, okay, let's go.
so it's like, I try to be relatable to people. So, but that's just what works for me. So [00:12:50] like you really have to find what works for you and not everyone's going to like you. But for me, it's allowed me to put so much content, free content on educating people how to play the IRS game. A lot of people don't know that.
Actually, a lot of people don't even know the basics of how taxes work. So even if they're not my client, I'm like, okay. That's okay. You need to realize how the tax brackets work that they're not, you know, everyone always says, Oh my gosh, I'm going to go over the tax bracket. And it's like, not all your income gets taxed at that because they don't teach us that.
So I try to go as basic to as in depth of like self directing your IRA. But in between there's like me drinking tequila and like having fun with my family because that's just like normal life, you know? but it has allowed me to work with clients all over the country and even some that don't even live in the United States.
States. We have clients also who are abroad, who invest in, in the United States. So it also allows me to work wherever I want, which is like the number one reason why I started my business. I never wanted to be tied to living somewhere.
Brendan: one quick shout out to Anna. So I did a quick 10 minute phone call with her as just kind of an exploration to see what kind of products and services. I think the thing that I really enjoyed about our conversation, you jam packed a lot of information in that 10 minutes was super helpful, but at the end you were like, Hey, if your local tax preparer is working for you and if you have a really great deal with them and if they know your books.
by all means, continue to use them. You can still leverage another expert for the preparation side, which I think most people kind of think it's all or nothing, right? I have to go to the same person who's going to give me the advice throughout the year, and they also have to be the one that files my taxes.
So I think that was very helpful and eye opening for me to understand. And I think helpful for the listeners, whether it's, you know, Anna K. CPA or someone else locally that they want to use. You don't have to sit with the same preparer and, tax advice person. It can be separate.
Ana: that really comes in shock when you've been working, and I, and I, and I'm not speaking for you, Brendan, specifically, I get this a lot where it's like, you know, I've been working with my parents, CPA, and it all comes down to the tax prep fees. And unfortunately. The older cpas nothing against them.
They never knew they were they're like a walmart and it's okay, right? They work in volume. I would I would have just stayed at like the company I was with if I wanted to work in volume Right, so it's like I don't want to do that And I I love my staff and I've made a promise anytime that anyone gets hired It's like this is not going to be public accounting. It's not at the end of they have a limited pto at the end of the year two weeks were shut down like even then If in the last two weeks of the year, you didn't come to us, like, I'm not going to stress myself or my staff [ because of, you know, you didn't do your time.
So like, I'm very honest. So I think it's like, if the CPA who is doing your tax preparing is working because they're cheaper, fine, but from the consulting side, they're clearly not giving you that. So you might need that as an add on somewhere else and that's okay.
David: Are there, are there specific red flags, like if you're, if you're looking for [00:15:40] a CPA or a tax advisor,
what are those specific red flags? Or if you see them, you should be like, run, get the hell out of there. Go find somebody else. Go, go talk to Anna.
Ana: I think it's like with everything else, everybody's an expert now, right? Like everybody, you give them, you hand them a microphone and everybody knows everything about everything. So I do say with anything, just be really careful. And I think If you need to be whatever business you're in, obviously we're speaking real estate.
It needs, you need to have someone who knows real estate. It's completely different than anything else. And I do see a lot of clickbait on TikTok and I don't hate them. Like that's, they're there for the money, but you just need to make sure when you have a [00:16:20] conversation with them that you ask them about the niche that you're in.
If you're in manufacturing, I wouldn't even take you because I don't even know what manufacturing does or anything, you know?
ask the specific questions, but honestly, the best thing is word of mouth. So if you're working with another real estate investor, they're going to refer you to like, Hey, we have, we're working with this attorney.
We're working with this realtor. But like always be careful what you see on social media because there is so much wrong information on there. Um, but at least it's a good place to have a conversation. I mean, I hear it all the time. They're like, this CPA told me I could do this. I'm like, where'd you see that?
They're like on TikTok. I'm like,
David: So you're
Ana: And I'm on there.
David: everything on the internet is true. Okay.
Ana: You know, is that news? Let me just say for everybody.
Brendan: So, like, hey, we have, a good place to have Highly real estate focused listeners. And I think it'd be really cool. I want to fire off a couple of different questions to you. Some of them are either well known topics and a real estate tax accounting, or maybe some things that might need like myth busted, depending on where you got your advice from.
If you got it from Tik TOK, maybe we've got to break that up a little bit. But, um, the first thing is you kind of talked about this earlier and I think this is very, Popular for a lot of real estate gurus where they talk about section 179 where you can buy a 6, 000 pound vehicle or over. Can you just walk us through exactly what that looks like?
Who does it apply to? Who does it not apply to?
Ana: Yes, so first of all, this is not tax advice. You should talk to your CPA. This is just us having a conversation. Okay, so this is great because I do love this. You see it all the time on social media because what attracts social media, I mean people. AMGs, Ferraris, right? I love that. I'm a car person. So I understand.
It depends. So there is this rule right now where if you have a business and you buy a car, it doesn't have to be brand new. It has to be new to you over 6, 000 pounds and you use it at least 50 percent or more for business. You can take an 80 percent deduction that year. So let's say, for example, you want to buy a hundred thousand dollar car.
That's an 80, 000 right off the first year. It's crazy. Last year was a hundred percent. Next year is 60
and we'll 2024 is right around the corner. Yes. It just keeps going down and there, I don't know what's going to happen, which is very unfortunate for. And for investors and for any business owners, because this also relates to real estate, but that's what the car.
So you want to buy your Ferrari and it's for business. So you can be a YouTuber and you can use it for media. I have clients who have done that. real estate investors as well. So you just have to make sure it's over 6, 000 pounds. And you can write, and you can potentially write it off 80 percent of it this year.
However, what happens next year? Like you can't rinse and repeat that you're going to buy an AMG every single year. So it's like, you got to be careful.
Brendan: That's, that's a tricky part. I think some people they'll get too wide eyed on the tax write off and they forget about the payment, right? The payment doesn't go away near to the payment's still there, but again, a really, really cool tax loophole. If you have a vehicle, that's a highway vehicle that you need to leverage for business.
Um, very cool. And I see a lot of people taking advantage of this pretty often. and the second question. You and I touched on this in our, in our 10 minutes together about, being a qualified real estate professional. So I've learned about this a little bit more at different conferences that I've been to and my local CPA kind of brought me up to speed a little bit.
Is this a newer role? And if so, what are the inner workings of it? How do you qualify as a real estate tax professional? I'm sorry, real estate professional for taxes.
Ana: Yeah. So this is not new. This has been around for many, many years. I think when you get emerged in real estate, you just, it starts coming off, right? So real estate professional status, I call it for short reps. This is how it works. Essentially, let's say you are a W and I'm going to make it really simple, straight to the point.
Cause I don't want to bore people. So let's say you have a high paying W2, you work at Chase bank and you make 250, 000. You start hanging out with us and you see that, you know, we buy real estate and you're like, let me buy some real estate. So Bob goes out and buys a rental property. And he's like, all right, awesome.
I'm going to depreciate it. I'm going to have a 50, 000 loss that year. Then he goes and does his taxes and his W2 is 250. But since he works a full time job, doesn't qualify for real estate professional. He is not going to see that 50, 000 against his W2 income. And here's why. Well, back in the day they were doing this a lot, so that the IRS was like, wait, I'm not getting my taxes.
This is not happening. So you have to pass two tests. This is also big for syndicators because they get sold on, Hey, you're going to have this huge write off. You don't cause you're passive. So how do you qualify? If you have a full time W 2 job, forget about it.
You're not going to qualify. And this is one of the most highly litigated things with the IRS. I was just talking to a friend who is an auditor. She has. seven cases in her doc, and she thinks one of them is going to pass. And I just had a client go through this. They didn't pass. So very highly litigated.
What you need to do is prove two things. Number one, that you work more than one half of your time in a real estate trader business. What does that mean? That just means if you work 2001 hours at Chase, you have to work 2002 hours in your rental properties.
Not going to happen because like, you're not like, no, it's impossible, right?
But if you work a part time job, you might be able to. And then let's say now, let's say you're not a W 2 earner, but you're a realtor. Okay, cool. You're a realtor. You pass test number one because that's real estate trader business. The second test is you have to manage your properties. So you can't just be like, oh, here's property management company.
I'm done. So those two tests have to be passed in order. to see those losses against that. So the golden rule is don't go get married because I told you this, but the golden rule is to be married as a W 2 and having a spouse who just qualifies as reps and you can write it off.
David: So that's interesting, because I think about Brendan and I, right? We are very much in a real estate centric role. It's what we do all day, every day. But we're W 2 employed, and you know, he invests in real estate, I do a little of that myself. But by the sounds of what you're saying, we would not qualify as a rep, correct?
Ana: Correct. Because um, a lot of people think that just because you're, you know, you're in a company that does real estate like me, I just do real estate accounting. That doesn't count. There's the IRS literally breaks down and gives you a list of the Professions that count as for test number one, so it's very, very hard to achieve, but it's something that if you have it, it's amazing, um, but it's hard.
Brendan: Have you had scenarios where you've obviously very specific to the client's situation, but where you've had the discussion of like, Hey, if you're ready to leave your job, just because you're ready to go full time in real estate investing, anyway, where like that tax advantage can be the thing that tips them over the scale to say, Hey, I'm finally going to take the leap so I can get that advantage, does that happen?
Ana: Yeah, it happens a lot. I just had one with a client who he's W2. She was W2 as well, but she's like, I don't want to work anymore. And I'm like, And we're talking numbers, so, you know, he was making about a million, she was making about 60, 000 and she works because she just wanted to work, which is great. But I'm like, the tax benefits that you're going to receive on a W 2 for a million dollars if you were to quit your job are insane.
ran through the numbers and she's like, 2074, I'm retiring, like, okay,
Brendan: That's cool. That's awesome. See, the more you know. If you don't know that loophole, or not loophole, but just that tax rule. I mean. People just kind of continue doing what they're doing and not be able to take advantage of the benefit. So that's that's really cool third question Anna What are some common pitfalls to look out for for real estate investors in the tax world?
So it could be something You know investing with a 401k type stuff. It could be Anything that comes to mind that you think people typically step in this pothole that I wish they would not
Ana: Everywhere I go, you guys will hear me neg about this, but it's their bookkeeping. Like, no matter what, it's, they suck. Like, seriously, 90 percent of my clients, like, I'll tell them, like, it sucks. And I get it. I totally understand. Like,
I feel your pain. It sucks. There is no other word to put it besides it sucks.
But that is what's costing clients. Potentially, depending on how much income you make thousands and have hundreds of thousands of dollars because we can't do proper planning, right? They wait till the last year because my flippers are the worst because they're flipping so fast that they're like, Oh my gosh, I have three houses over here.
I'm like, well, which house did you, what's going on? So they don't know. So that's the number one thing. So when we try to plan and they're like, I want to buy the Ferrari, I want to self direct my area. I'm like, well, how much money did you make? Um, so that's the number one thing with any business owner.
Learn how to do your bookkeeping, do it on time or outsource it. that will cost you, you know, like I said, headaches. but then the other thing is not having a good tax preparer CPA and it's not to sell my services. You can go whoever you want. You know, it doesn't matter. It's really just, you need to change your mindset to make it be an investment, not an expense when it comes to the consulting side because it could cost you thousands.
We have clients all the time. I'm like, did you do a cost segregation? And they're like, well, Bob didn't even know what my cost segregation was. And I'm like, That could have saved you. I had a client, for example, this is a great example. She had about 60 properties. Last year she came to us, real estate professional, everything.
They have three other businesses and I'm like, Hey, have you ever done a cost segregation? They're like, we had no idea. We were able to do a cost segregation for all her properties. I mean, she has a net loss for like the next seven years, unless she makes a lot of money. but obviously paying that CPA was 1 versus paying a good CPA is probably 10x.
David: people are often curious about what that top 1 percent is doing, right? Like the ultra wealthy, how they get there, right? And like, there's different ways to get there, but ultimately, what are the things that they are doing that you've identified that are different?
Whether it's habits that they have to create that wealth, habits that they have to manage that wealth. Have you noticed specific trends among that portion of your client base that differs from people that aren't in that portion yet or still trying to get there?
Ana: yes, Number one is they surround themselves. I know it sounds so cliche, but they really do like outsource everything. And they do what they're good at and that's it. So if they're not good at finding deals, they outsource it.
I mean, it's hot, whatever it is, they outsource it because they have to stick to what they're good at. Number two, they invest a lot money into passive activity, which is real estate. That is how much, how the wealthy really become wealthy. They have businesses all the time, but they also realize that the IRS.
Rules are created by the wealthy for the wealthy. So they play the game. They are not afraid to play the game and that's okay. There's so many things that people who are not W 2 can do, I mean, we can write off, I always tell clients, I mean, I don't tell them this, but, um, you can write off 90 percent of your life. Doing it correctly, right? Like I'm not going to go to jail for any of my clients as opposed to someone who just, you know, works at Chase Bank. And again, there's nothing wrong with them, but we're able to deduct everything. When you see Grant Cardone writing off that private jet, that's legitimate. Like everything they do when they hire their children and pay them and take that deduction, that's legitimate.
So it's having people around you who know way more than they do so that [00:27:50] they can say, what can, what should I do?
David: Excellent advice.
Brendan: this reminds me of the, uh, it's like the, the, who, not how paradox, right? So it's not, how do you do it? It's who do you know? And knowing a really good CPA or tax, uh, account is really important to be able to understand all this.
Ana: It's such a great, I mean, a lot of people will get scared, you know, of the IRS. They're like, what if I get audited? And my answer is always like, oh, you're laundering money. Do you work for the cartel? Like what's happening that you're so scared? Because if you get audited. Unfortunately, a lot of times the IRS auditors, they're not hiring CPAs.
They don't pay them enough to go and work there. They hire, they pay 175, 000. Great. But they start low. Um, so it's like they don't hire educated people who are in the realist. I wish they did. I'd be so rich. I've audited everybody I know. Right. But they don't. So it's like, if you're scared of the IRS, there's nothing wrong with it.
They're just going to audit you and hopefully you didn't do anything illegal. There's a difference between tax avoidance and tax evasion. Evasion will get you in jail [00:28:50] regardless if you wait five to ten years. You've seen the people on reality TV who I'm like, why are you so dumb? Like, how are you not going to pay your taxes and be a reality TV star?
But avoidance is when you play the game.
David: I dig that. I did not know the difference between those two terms. If I heard tax avoidance, I'd be like, You're going to jail, dude! Ha ha ha Anna, what else are we perhaps missing that you might want the, uh, the audience to know here? Is there anything you wanted to touch on?
Ana: Yeah, I think we talked about the real estate professional status. And we talked about the two tests, but you'll hear on, um, On social media a lot about the short term rental loophole I don't know if you guys have heard about it And then I want to talk about self directing your ira because that's something that a lot of people have that don't know Short term rental loophole essentially what it is is let's say you're still working at chase making, you know, 200k and You want to get some of the benefits of being real estate investor, but you obviously cannot pass the two tests that we talked about.
So the loophole here is you buy a short term rental, you manage it like you have to manage it. And it's a lot of work. You cost segregating, meaning you accelerate your depreciation. And the first year you can probably write off. Depending on the purchase price of the property, a 500, 000 property will probably get you a 150, 000 to 200, 000 write off the first year.
So it kind of like, wipes out your entire income from Chase. Now remember kind of what we talked about the Lamborghini, it's like a rinse and repeat, right? Because the first year you got that write off, but next year you don't. So it's a great loophole that people should know about, but I always give them the good and the bad.
And if this, 80, uh, bonus
depreciation doesn't come back, Now we're screwed, but let's hope not. Um, so that's one huge loophole, but the other one for people who are like, you know what? I really don't want to be a landlord. I really don't want to, and you know, when people say, I don't want to get those calls at two in the morning.
And I remember I'd be sitting at bigger pockets and I'm like, am I going to get those? I've never gotten a call at two in the morning, like never. Um, so that doesn't really happen. I don't think, I don't know if that ever happened to anybody else, but, but if you want to be really passive and you have an IRA. Let's say you want to, this is a great example. If you have an IRA, And you have to be able to self direct it. There's a reason why Fidelity's not gonna tell you this. So let's say you have an ir A, you have a hundred K and you're like, Hey, I don't wanna buy rental properties, but I wanna make more money.
You can use that money in your IRA to either buy properties, lent, which by the way, being the bank is the best thing you can be in the entire world. It's amazing. you can lend that money to people who are flipping or you can give it to a fund. And then they'll lend it out to other people. So, for example, I just bought, I just did that.
I lent my IRA money to my friends who are doing flips and are active. But I have other clients who have IRA money who do flips also within their IRAs. So all that money is going to go back in your IRA and you're just creating wealth for the future. It's not for now, but it's in the future. So there's just so many strategies that people don't know about that they just need to educate themselves.
David: I love it.
Brendan: Perfect. And, uh, before we get you out of here, we want to do a, uh, fun little fall edition speed round. So we're gonna, we're gonna fire off some questions that are all, uh. You know, fall related and we'll see kind of how you answer. It's going to be like a, this or that type style.
Ana: All right.
Brendan: Cool. All right. Pumpkin spice latte or apple cider.
Ana: Apple cider.
Brendan: Seem like an easy decision. Okay. Uh, black Friday or cyber Monday.
Ana: Oh, Cyber Monday. Who wants to be in line?
David: Ha ha ha ha I agree with that. Uh, let's go ham or turkey,
David: Macy's parade or the dog show.
Ana: Oh, the dog show. I'm a
Brendan: I was going to say that that that seems like a super easy choice.
Doc show. That's the best. So good. Well, Anna, thank you so much for joining us, uh, for all of the tax prep and, uh, tax filing advice. Well, cause conversation as opposed to advice that you gave, where can people learn a little bit more about you if they want to get in touch or just kind of follow along passively at what you're, what you're up to.
Ana: Yeah, you can, follow us, me and my team on Instagram at Anna KCPA or on TikTok. We're also on TikTok. and you can reach out to us there or just, you know, get the free content that we put out all the time.
Brendan: Perfect. Thanks so much, Anna. And I'm going to sign us off. So thanks for tuning in to this week's episode. Make sure to let us know what you think are right in suggestions or topics for the show at podcast at upright. us.
David: And make sure to like, and subscribe to real estate investing unscripted. So you don't miss any episodes. And if you like what you hear, leave us a five star review. Thanks guys.
Brendan: Thank you, Anna.
Ana: Thank you