{ “@context”: “https://schema.org”, “@type”: “FAQPage”, “mainEntity”: [ { “@type”: “Question”, “name”: “What is the difference between the STR loophole and Real Estate Professional Status?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The STR loophole is the ‘shortcut’ version of REPS for W-2 earners. REPS requires you to be a full-time real estate professional (750+ hours, majority of working time). The STR loophole only requires material participation in a specific short-term rental activity — which can be achieved with 100+ hours per year if no other person spends more time on the activity. Both strategies generate the same result: rental losses that offset active income. KDA’s Los Angeles team will determine which strategy fits your lifestyle and income profile.” } }, { “@type”: “Question”, “name”: “How should I structure my real estate portfolio across multiple LLCs?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “For Los Angeles investors with 3+ properties, the most common structure is a holding company LLC (the ‘parent’) that owns multiple property-specific LLCs (the ‘children’). This provides liability isolation between properties while allowing centralized management and tax reporting. The holding company can also hold your management company, creating additional liability protection. KDA’s real estate CPA team works with real estate attorneys to design structures that optimize both tax efficiency and liability protection.” } }, { “@type”: “Question”, “name”: “How do I pay my children through my real estate business to shift income?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Income shifting to children through your real estate business is a legitimate tax strategy when done correctly. Your child must perform real, documented work — property management tasks, administrative work, photography, social media management for your rentals. Pay must be reasonable for the work performed. For children under 18 in a sole proprietorship or disregarded LLC, wages are exempt from FICA tax — saving you 15.3% on top of the income tax rate differential. KDA’s Los Angeles team will document the arrangement properly to withstand IRS scrutiny.” } }, { “@type”: “Question”, “name”: “What is an installment sale and when does it make sense for real estate?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Installment sales make the most sense when: (1) you can’t find a suitable 1031 replacement property; (2) you want to generate passive income from the sale proceeds; (3) spreading the gain over multiple years keeps you in lower tax brackets; or (4) you’re approaching retirement and want to match income recognition with your lower-income years. KDA’s Los Angeles real estate CPA team has structured installment sales for dozens of investors and will show you exactly how the tax math works for your specific property.” } }, { “@type”: “Question”, “name”: “What is the tax treatment of real estate professional fees and commissions?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Real estate professional fees — agent commissions, attorney fees, title insurance, escrow fees — are treated differently depending on whether they’re paid on acquisition or disposition. Acquisition costs (paid when buying) are added to your basis and depreciated over 27.5 or 39 years (or accelerated through cost segregation). Disposition costs (paid when selling) reduce your amount realized, directly reducing your taxable gain. For Los Angeles investors, properly categorizing and tracking all transaction costs can reduce taxes by thousands of dollars. KDA’s team will ensure all transaction costs are captured and treated optimally.” } }, { “@type”: “Question”, “name”: “What are the California FTB audit triggers for real estate investors?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “FTB audits of real estate investors typically focus on three areas: (1) residency — California aggressively pursues former residents who claim to have moved while still owning California real estate; (2) passive loss claims — especially REPS and STR loophole elections; and (3) 1031 exchange compliance — particularly out-of-state exchanges and annual Form 3840 filing requirements. KDA’s Los Angeles real estate CPA team builds comprehensive audit files for every client, ensuring that every position is documented and defensible.” } }, { “@type”: “Question”, “name”: “How do I handle the tax implications of a short sale or foreclosure on rental property?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “A short sale or foreclosure on rental property creates two potential tax events: (1) cancellation of debt (COD) income — if the lender forgives debt exceeding the property’s value, the forgiven amount is generally taxable income; (2) gain or loss on the disposition — calculated as the difference between the debt discharged (the ‘amount realized’) and your adjusted basis. For Los Angeles investors, the COD income may be excludable if you’re insolvent at the time of the foreclosure (the insolvency exclusion). KDA’s team will calculate your tax exposure from a short sale or foreclosure and identify all available exclusions.” } }, { “@type”: “Question”, “name”: “How does estate planning interact with real estate investing?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Real estate is one of the most estate-tax-efficient assets to hold and transfer. The key strategies: (1) Stepped-up basis at death — heirs receive your property at its fair market value on your death date, eliminating all accumulated capital gains and depreciation recapture; (2) 1031 exchange + hold until death — defer all gains through 1031 exchanges, then die holding the property for a complete tax elimination; (3) Irrevocable trusts — remove appreciating real estate from your taxable estate while maintaining some control; (4) Family limited partnerships — transfer real estate to children at a valuation discount. KDA’s Los Angeles team works with estate planning attorneys to integrate real estate into your estate plan.” } }, { “@type”: “Question”, “name”: “What is bonus depreciation and how does it work for real estate in 2026?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “In 2026, bonus depreciation is back to 100% permanently thanks to the One Big Beautiful Bill Act. For real estate investors in Los Angeles, this means that any 5-, 7-, or 15-year property identified through a cost segregation study can be fully deducted in the year of acquisition. Previously, bonus depreciation had phased down to 60% in 2024 — the restoration to 100% is the single biggest tax change for real estate investors since 2017.” } }, { “@type”: “Question”, “name”: “Can I use the STR loophole to offset my W-2 income from a high-paying job?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The STR loophole is the most popular tax strategy among high-income W-2 earners in 2026 for good reason. By purchasing a qualifying STR in Los Angeles, materially participating in its management, and running a cost segregation study, you can generate large paper losses that offset your salary dollar-for-dollar. A physician earning $500,000 who generates $200,000 in STR losses saves $74,000+ in federal taxes alone. KDA’s team will model your specific income profile and show you exactly how much you can save.” } } ] }