{ “@context”: “https://schema.org”, “@type”: “FAQPage”, “mainEntity”: [ { “@type”: “Question”, “name”: “How can I use a self-directed IRA to invest in real estate?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Using a self-directed IRA to invest in Riverside real estate combines two of the most powerful wealth-building tools available. Rental income flows back into the IRA tax-deferred or tax-free, and when you eventually sell, the gain is sheltered from current taxation. The critical compliance requirements — no self-dealing, no personal use, all expenses paid from the IRA — require careful planning. KDA’s Riverside real estate CPA team has extensive experience with SDIRA real estate investments and will ensure your structure is compliant.” } }, { “@type”: “Question”, “name”: “What is the difference between a real estate CPA and a real estate tax accountant?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The terms are often used interchangeably, but there is a meaningful distinction. A CPA (Certified Public Accountant) holds a state license requiring 150 credit hours of education, passing the CPA exam, and ongoing continuing education. A tax accountant may or may not hold a CPA license. At KDA Inc., our Riverside team includes licensed CPAs and Enrolled Agents (EAs) — both of whom are authorized to represent clients before the IRS and specialize in real estate tax strategy.” } }, { “@type”: “Question”, “name”: “How do I handle rental income and expenses if I own property with a partner?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “When you own rental property with a partner in Riverside, the tax reporting depends on your ownership structure. Direct co-ownership (tenants in common): each owner reports their share on Schedule E. LLC or partnership: the entity files Form 1065 and issues K-1s. The partnership structure offers more flexibility — you can allocate income, losses, and depreciation in ways that differ from ownership percentages, subject to the substantial economic effect rules. KDA’s real estate CPA team will design the optimal co-ownership structure and handle all partnership tax compliance.” } }, { “@type”: “Question”, “name”: “What happens to my rental property losses when I sell the property?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “When you sell a rental property, all suspended passive losses from that property are released and can be used to offset any type of income — not just passive income. This is called the ‘disposition rule’ under IRC Section 469(g). For Riverside investors who have accumulated years of suspended passive losses (because their AGI exceeded the $25,000 allowance threshold), the sale of the property unlocks all those losses at once. This can significantly reduce the tax on the sale gain. KDA’s team tracks your suspended passive losses and models the tax impact of a sale in advance.” } }, { “@type”: “Question”, “name”: “How do I prove material participation in my short-term rental to the IRS?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Material participation for the STR loophole requires meeting one of seven IRS tests, the most commonly used being: (1) you participated for more than 500 hours during the year; (2) your participation was substantially all the participation in the activity; or (3) you participated for more than 100 hours and no other person participated more than you. The IRS requires contemporaneous documentation — a daily log of your activities, hours spent, and tasks performed. KDA’s Riverside team provides clients with a time-tracking template and conducts quarterly reviews to ensure your documentation will withstand IRS scrutiny.” } }, { “@type”: “Question”, “name”: “What is a 721 exchange and how does it work for real estate investors?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The 721 exchange is an advanced exit strategy for Riverside real estate investors who want to: (1) defer capital gains tax; (2) exit active property management; (3) diversify into a large institutional real estate portfolio; and (4) maintain liquidity through publicly traded REIT shares. By contributing your property to a REIT’s operating partnership, you receive OP units (tax-deferred) that can be converted to REIT shares over time. KDA’s real estate CPA team will model the 721 exchange alongside 1031 exchanges and DST investments to find the optimal exit strategy.” } }, { “@type”: “Question”, “name”: “How does California’s 13.3% income tax rate affect real estate investors?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “California’s 13.3% rate means every dollar of rental income or capital gain costs significantly more in CA than in most other states. For Riverside investors, this amplifies the value of every tax strategy: a $100,000 cost segregation deduction saves $13,300 in CA state tax alone — on top of federal savings. KDA’s Riverside team designs California-specific tax strategies that account for the state’s unique tax environment, including CA’s non-conformity with certain federal provisions.” } }, { “@type”: “Question”, “name”: “Can I do a cost segregation study on a property I’ve owned for years?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Yes — this is called a ‘catch-up’ or ‘look-back’ cost segregation study, and it’s one of the most powerful strategies for investors who have owned properties for years without doing a study. Using IRS Form 3115, you can claim all the accelerated depreciation you should have taken in prior years as a single deduction in the current year. No amended returns required. KDA’s Riverside team regularly identifies six-figure deduction opportunities for investors who thought they had already maximized their depreciation.” } }, { “@type”: “Question”, “name”: “What is the Section 121 exclusion and can I use it for investment property?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The Section 121 exclusion allows homeowners to exclude up to $250,000 ($500,000 married) of capital gains from the sale of their primary residence, provided they’ve owned and used it as their primary residence for at least 2 of the last 5 years. Investment properties do NOT qualify for the Section 121 exclusion. However, if you convert an investment property to your primary residence, live in it for 2+ years, and then sell, you may qualify for a partial exclusion. The exclusion does NOT apply to depreciation recapture — that portion is always taxable. KDA’s Riverside team will model the Section 121 opportunity for any investment property you’re considering converting.” } }, { “@type”: “Question”, “name”: “Can I group my rental properties to maximize tax deductions?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Grouping elections can dramatically change your tax position as a Riverside real estate investor. By grouping rental activities, you can aggregate hours across properties to meet material participation tests, and potentially convert passive losses to non-passive across your entire portfolio. However, grouping rules are complex — some activities cannot be grouped, and improper grouping can create problems. KDA’s real estate CPA team will design the optimal grouping structure for your portfolio and make the correct elections on your return.” } } ] }