Wait, I thought Section 1231 losses always get ordinary loss treatment regardless of holding period? Isn't the 1 year+ holding period just for determining if gains get capital gains treatment? I've been doing my taxes wrong if that's not the case!

You're right that Section 1231 losses are treated as ordinary losses regardless of holding period. I should have been more precise in my explanation. What I was referring to is that to qualify as Section 1231 property in the first place, the property must be used in a trade or business and held for more than 1 year. Since the OP has held it for 2 years as a rental, it qualifies as Section 1231 property. If it had been held for 1 year or less as a rental, it wouldn't qualify for Section 1231 treatment, and would instead be subject to ordinary income/loss rules for property not used in a trade or business.

I actually haven't heard of cost segregation before. That sounds really useful! Is it something I could still do now even though I've already been depreciating the property as a whole for 2 years? Or is it too late to change how I've been handling the depreciation?

That's a really good question! I've actually been wondering about that too. My initial plan was to have everything under one LLC for simplicity, but now I'm second-guessing if that's the best approach. Did your tax person explain any specific benefits to having them separate?

The main reason he gave was liability protection. If someone sues your property management business, they could potentially go after your personally owned properties if they're in the same LLC. With separate LLCs, there's a stronger legal separation. From a tax perspective, he mentioned it can be cleaner for accounting and if you ever want to sell either business. Also said it might give more flexibility with how you handle certain deductions and expenses. The downside is more paperwork and potentially higher costs for maintaining multiple LLCs depending on your state.

This is super important! I learned this the hard way in California. Was managing just two properties for family members and got hit with a fine because I didn't have the required real estate license. Rules vary by state but better to check before you get too far along.

Does claiming the Recovery Rebate Credit also trigger a review? I claimed that for a missing stimulus payment.

Recovery Rebate Credit can definitely trigger additional review, especially if the amount you're claiming doesn't match IRS records. The IRS is extra careful with these credits because there were a lot of issues with improper claims (both accidental and fraudulent) during the pandemic years. The good news is that even with the delay, you should eventually get the refund if you're legitimately entitled to it. But it might take 6-8 weeks instead of the usual 21 days.

Thanks for this info! I checked and I do have that PATH Act hold. Wish the "Where's My Refund" tool would just tell you this instead of the vague "still processing" message.

This is really interesting, I hadn't heard of this option. Do these loans work for HELOCs too, or just for primary mortgages? And any idea which lenders typically offer them? My credit score is excellent (820+), it's just this stupid DTI issue because of the deductions.

They work primarily for primary and investment property mortgages, but some lenders have started offering HELOCs with bank statement options too. It's less common for HELOCs but definitely exists. Most non-bank lenders offer some version of these programs. Companies like NewRez, Angel Oak, and North American Savings Bank are known for their bank statement loan programs. Credit unions sometimes offer them too. With your excellent credit score, you'd likely qualify for the best rates they offer on these products. I'd recommend talking to a mortgage broker rather than going directly to lenders - brokers will know which specific lenders have programs that fit your situation.

Second this! Manual underwriting is the way to go for self-employed people. When we bought our house, we got denied by three big banks before finding a local credit union that actually took the time to understand my business income. They looked at my profit/loss statements and business bank accounts instead of just my tax returns.

This is unnecessarily alarmist. Helping a friend one time doesn't make you a money transmitter business under FinCEN regulations. The money transmitter laws are for people regularly engaged in the business of transmission. A one-off favor doesn't qualify.

You're right that a single transaction probably wouldn't trigger money transmitter registration requirements, but it can still create reporting complications. FinCEN has been increasingly scrutinizing crypto transactions. What concerns me more is that banks and exchanges are filing suspicious activity reports for exactly this type of activity - receiving crypto and immediately cashing it out for someone else. While one transaction might not be an issue, it's important for OP to understand there are regulatory considerations beyond just tax reporting.

I think they only issue 1099-Ks if you exceed $20,000 in transactions AND more than 200 transactions in a year. Did you do a lot of other crypto trading? For 2023 taxes they were supposed to lower the threshold but they delayed that.

That used to be the case, but they've been inconsistent in my experience. I had less than $15k in total transactions for the year and definitely fewer than 200 transactions. They still issued one to me, which is why I warned about it. The reporting thresholds are supposed to change soon anyway, so better to be prepared.