{ “@context”: “https://schema.org”, “@type”: “FAQPage”, “mainEntity”: [ { “@type”: “Question”, “name”: “What is the difference between active, passive, and portfolio income for real estate investors?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The IRS classifies income into three categories, each with different tax treatment: (1) Active (earned) income — wages, self-employment income, real estate dealer income; subject to income tax AND self-employment/FICA tax. (2) Passive income — rental income, limited partnership income; subject to income tax but NOT self-employment tax; losses can only offset passive income. (3) Portfolio income — dividends, interest, capital gains; subject to income tax and potentially NIIT; not subject to SE tax. For Oceanside real estate investors, the goal is to maximize passive income (no SE tax) while unlocking passive losses through REPS or the STR loophole.” } }, { “@type”: “Question”, “name”: “How does depreciation work for a rental property I converted from my primary residence?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “When you convert a primary residence to a rental property, your depreciation basis is the LOWER of (1) your adjusted cost basis or (2) the fair market value at the date of conversion. This is an important distinction — if your home has appreciated significantly, you cannot depreciate the appreciation. You can only depreciate the value at conversion. KDA’s Oceanside team handles primary-to-rental conversions regularly and ensures your depreciation basis is calculated correctly from day one.” } }, { “@type”: “Question”, “name”: “How do I handle real estate investments in a divorce?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Divorce involving real estate creates complex tax issues for Oceanside property owners. Key points: (1) transfers of property between spouses incident to divorce are generally tax-free under IRC Section 1041 — no gain or loss is recognized; (2) the receiving spouse takes the transferring spouse’s adjusted basis (including accumulated depreciation); (3) if the marital home is sold, the Section 121 exclusion may apply if both spouses meet the ownership and use tests; (4) rental property transferred in divorce retains its depreciation schedule and passive loss history. KDA’s Oceanside team will advise on the tax implications of real estate division in divorce and help you negotiate the most tax-efficient settlement.” } }, { “@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 Oceanside 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”: “What is a reverse 1031 exchange and when should I use one?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “A reverse 1031 exchange allows you to acquire the replacement property BEFORE selling your relinquished property — the opposite of a standard exchange. This is useful in competitive markets like Oceanside where you need to move quickly on a replacement property before your current property sells. The replacement property is held by an Exchange Accommodation Titleholder (EAT) until you sell the relinquished property, with a 180-day window to complete the sale. Reverse exchanges are more complex and expensive than standard exchanges but can be essential in fast-moving markets.” } }, { “@type”: “Question”, “name”: “What are the deadlines for a 1031 exchange?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The 45-day identification deadline is the most commonly missed in a 1031 exchange. You have exactly 45 calendar days from the sale of your relinquished property to identify up to three replacement properties (or more under the 200% rule or 95% rule). The 180-day closing deadline runs concurrently from the same sale date. KDA’s Oceanside real estate CPA team begins exchange planning months before your sale to ensure you have replacement properties identified and under contract before the clock starts.” } }, { “@type”: “Question”, “name”: “How do I pay my children through my real estate business to shift income?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Paying your children for legitimate work in your real estate business is a legal income-shifting strategy that can save significant taxes. If your child is under 18 and you operate as a sole proprietorship or single-member LLC (not a corporation), their wages are exempt from FICA tax. Their wages are deductible to you at your marginal rate and taxed to them at their lower rate (often 0–10%). For a Oceanside investor in the 37% bracket paying a child $14,600 (the 2026 standard deduction), the tax savings are approximately $5,400. The work must be legitimate and the pay must be reasonable. KDA’s team will structure this strategy correctly.” } }, { “@type”: “Question”, “name”: “How do I handle security deposits for tax purposes?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Security deposits are NOT taxable income when received — they are liabilities (you owe them back to the tenant). They become taxable only when you apply them to unpaid rent or damages (at which point they become rental income). If you return the full deposit, there is no tax consequence. For Oceanside landlords, the key is keeping security deposits in a separate account and tracking them carefully. KDA’s team will ensure your security deposit accounting is correct and that you’re not inadvertently reporting them as income.” } }, { “@type”: “Question”, “name”: “What is the QBI deduction and does it apply to rental real estate?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The QBI deduction can add 20% savings on top of all your other real estate deductions. For a Oceanside investor with $200,000 in net rental income that qualifies for QBI, the deduction is $40,000 — saving $14,800 in federal taxes at the 37% rate. Qualification requires your rental activity to be a ‘trade or business,’ which is met through REPS, the STR loophole, or the 250-hour safe harbor. KDA’s real estate CPA team will document your rental services hours and structure your activities to maximize QBI eligibility.” } }, { “@type”: “Question”, “name”: “How does the at-risk rules limitation affect real estate investors?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The at-risk rules are a threshold test that must be passed before the passive activity rules even apply. For Oceanside real estate investors, the good news is that qualified nonrecourse financing — the standard mortgage from a bank or commercial lender — counts as at-risk. This means your deductible losses include not just your equity but also your mortgage balance. The at-risk rules become relevant when you use seller financing, related-party loans, or other non-qualified financing. KDA’s team will analyze your financing structure and confirm your at-risk amount.” } } ] }