Tax Changes for Real Estate Investors with Amanda Han and Matt MacFarland of Keystone CPA-Part 1


Having helped thousands of investors across the US to save on taxes, Matt MacFarland and Amanda Han are founders at Keystone CPA, Inc. As both tax strategists and real estate investors, Amanda and Matt combine their passion for real estate investing with their expertise and knowledge in tax strategies. Their goal is to help investors with strategies designed to supercharge their wealth-building using entity structuring, self-directed investing, and income offset opportunities to keep more of what they make.

Amanda and Matt’s highly rated book Tax Strategies for the Savvy Real Estate Investor is amongst Amazon’s top seller list.

They are also frequent contributors, speakers, and educators to some of the nation’s top investment and self-directed IRA companies.  Their cutting-edge tax strategies have been featured in prominent publications including Money Magazine,, and Matt and Amanda were speakers at “Talks at Google” that features influential thinkers and creators. They have also appeared in CNBC’s Smart Money Talk Radio as well as BiggerPockets podcasts.

Matt and Amanda specialize in bringing top-notch tax-saving strategies that are traditionally only available to high net-worth clients to everyday investors nationwide. They both have experience working for the “Big 4” CPA firms specializing in the real estate and high net-worth individual specialty groups. Amanda is a graduate of UNLV and Matt is a graduate of UCLA with a Master’s Degree from USC. Both of them are certified by the CA State Board of Accountancy and are members of the prestigious American Institute of Certified Public Accountants (AICPA).


Episode Highlights:

  • What is Cost Segregation
  • Standard Deduction
  • Current Corporate Tax rate
  • Current Tax rate for Personal Taxes
  • Current Capital Gains Tax rate
  • Medicare Taxes
  • Wealth Taxes

Episode Notes:


Narrator  This is The Norris Group’s real estate investor radio show the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever changing real estate market hosted by author, investor and hard money lender, Bruce Norris.

Bruce Norris  Hi, thanks for joining us. My name is Bruce Norris and I’m with Joey Romero. And our guests today are really two friends. Having helped 1000s of investors across the US to save on taxes Matt McFarland and Amanda Han are founders of Keystone CPA. As both tax strategist and real estate investors, Matt and Amanda combined their passion of real estate investing with their expertise in tax strategies. Their goal is to help investors with strategies designed to supercharge their wealth building, using entity structuring self directed investing and income offset opportunity to keep more of what they make. Amanda and Matt’s highly rated book, Tax Strategies for The Savvy Real Estate Investor is amongst Amazon’s top seller list. They speak and have written in many of the top publications, they have experience in working with the big four tax companies, and they’re just really great people. So, Matt and Amanda, welcome to our show.

Amanda Han  Thank you for having us. excited to be back.

Matt MacFarland  Yeah, thanks, Bruce. Appreciate it.

Bruce Norris  I thought I would open this, because it’s interesting that we get, in my head is sort of like comes out as a different narrative. But 38 and a half percent of taxes, US taxes collected, are paid by the top 1% of earners. 70.1% of all taxes collected are paid by the top 10% of earners. Meaning that 29.9% of federal taxes that were paid, were paid by the bottom 90% of taxpayers. So, the top 1% paid 38 and a half, the bottom 90 pay 29.1. And why do I bring this up? Because if you’re going to chase tax revenue, you have to take it from the top 10%. And maybe especially the top 1%. So, having said that, I’m just curious, Matt and Amanda, what’s the general mood of your clients? Who have accumulated some wealth?

Amanda Han  Gosh, well, you know, I think most of our clients are very proactive, you know, when it comes to tax planning, and..

Bruce Norris   Sure.

Amanda Han  The reason why most people hire to work with us. But, but yeah, it’s definitely more on a, more elevated or heightened level in, you know, was, before I think a lot of clients would more passively wait for us to tell them when there are tax changes. And now we’re getting you know, more frequently we’re getting clients who are following the media, following the news, and then contacting us and say, ‘Hey, I read about this, or I heard about that’. So, certainly a lot more awareness in what is coming up, you know, in terms of proposals and things like that, you know, in the past, people would say, ‘Oh, well, this is passed by, this is tax changes passed’. We work on the strategies, talk to the clients about it. This is kind of where we’re talking about strategies before anything is even past. Right.

Matt MacFarland  I think the, I think part of the mood is the, you know, there’s a lot of deficits, right? It’s, you know, it’s got to pay for somehow, right? So, I think the general consensus, obviously, the taxes are going to go up and it you know, it’s question of, you know, how much and when, right? Like, that’s, that seems to be what we’re seeing.

Bruce Norris  Okay. What, would you say the majority of our clients are real estate heavy, or stock heavy, or really a combination?

Amanda Han  That’s a good question. I mean, all of our clients are fairly real estate heavy. So not, you know, not everybody has a, you know, a huge portfolio, but all of our clients have a focus in real estate in some form or fashion. We do have also a lot of clients that are in the tech industry who are stock heavy, you know, because that’s their employer or they have a startup. But, but yes, most of them, almost all of our clients are somewhat heavily involved in the real estate side, or at least plan to be heavily involved in real estate.

Bruce Norris  

What’s interesting is, I’m not sure most people know but you have a bird’s eye view of the mood of America when you do a season of taxes. Because you’re sitting across from people that are either pretty euphoric, or pretty, pretty devastated. So, you may have a very interesting blend this year, you’ve got people that own assets that are you know, pretty dang excited about what happened to their stock portfolio after say March and April. And we’re, the real estate prices, but you also may have tax preparing going on for a small business person that doesn’t know anything other than that business.

Amanda Han  Yeah.

Matt MacFarland  It’ll be one of the things when we, when we prepare taxes and our software, they’ve got a you know, a little one page thing that compares, you know, this year to last year. So, it’ll be interesting. That’s one of the things I always look at as I’m kind of doing my last level, high level review of return is like, what are the big changes from year to year? And so I think that’ll be really interesting to see, you know, kind of see that see that drastic changes, and then dive down and see, okay, what was it? Was it revenue? Was it expenses, you know, all kinds of things like that? I think it’ll be interesting.

Amanda Han  Yeah. And I think something so interesting this year, is, you know, Matt and I were, we attended several continuing education classes for CPAs last week. So, we attended one that talked about the projected or the proposed tax changes for 2021 and beyond, which is, you know, talking about mostly tax increases. And then we also took another two-day course, about the 2020 CARES Act changes, which was, you know, a lot of the credits and the benefits and the bonus depreciation. So, I think it’s a huge swing in the tax world in terms of what transpired in 2020, versus what is potentially coming down the pipeline. So, yeah, huge swinging mood, for sure.

Bruce Norris  Well, let’s talk about, you know, we’re about to do our 2020 taxes. So, what were some of the changes that are, you know, the already in place did that when you do your taxes in 2020? What’s going to be, what’s different in 2020, and might not be there in 2021? Or what’s, what was, go ahead,

Matt MacFarland  I was going to say one of the things that comes to mind right away is, especially given how 2020 could be a significantly different year for a lot of people in terms of income, or having a bad year, depending on their industry is that with a 2020 year if somebody generates a net operating loss on their tax return, and easiest way to think about that is if somebody has, you know, negative taxable income on their personal return, they’re generally going to have what’s called a net operating loss, and the IRS has given people the ability to take that 2020 loss, and either carry it backwards five years to 2015, or carried forward to 2021. And the taxpayers can make their choice depending on how their income was five years ago, versus what they think it’s going to be next year. That goes away, starting with 2021 returns. So, in 2021, if somebody has the exact same loss, unless they change the law again, they’re not going to be able to carry that 2021 loss backwards, they’d have to carry it forward. So, that’ll be something I think people will be, keep an eye on and take advantage of and, you know, work with a CPA to kind of figure out that analysis.

Bruce Norris  That should leave a pretty big hole for tax revenue for 2020.

Amanda Han  You know, it’s interesting, because, you know, I think a lot of people would think. Well, obviously, if I can, if I had a bad year, and I needed the cash right, now, I would go back and get a refund immediately, right? But I think one of the, the planning points that we’re talking to clients about is, you know, the concept of maybe falling extensions, we have clients who just always are on extensions, and we have ones who are very anti extension. But that might be a reason to consider extending this year, because, you know, what, if tax rates do increase, starting in 2021, it might make more sense to use those 2020 losses to offset 2021 income.

Bruce Norris  Oh, I see.

Amanda Han  Yeah, if you were, you know, 30% tax bracket in 2015. And then now, all of a sudden, you’re in 39.6%. In 2021, you’re going to save a lot more money in your pocket. But, you know, who knows, if by April 15, we’ll have the answer to, you know, what our tax rates’ going to be. And if we don’t, then it might make sense to file extensions, just so we have, you know, more hindsight into what exactly is going to happen in the future?

Bruce Norris  Yeah. It’s a really good point.

Joey Romero  Is there any talk about in 2020, since we’re talking specifically about that, any of the rules that came across for based on the pandemic and COVID? How is that, because if there’s one thing that we know about real estate investors, they’re creative, you know, so they try to find solutions. And are there any strategies that you’ve heard of or anything that they could take advantage? Because the, the things that came down through COVID?

Amanda Han  Yeah, certainly why, even just the one that Matt was talking about, right? The the net operating loss, that’s part of the CARED Act under COVID. So, from a planning perspective, for real estate investors, when we talk about depreciation, you know, cost segregation, where we can basically, you know, push forward all of our future write offs. That’s a huge planning point that we’re going to be looking at whether to implement when we file the 2020 tax return, because if so, you know, someone who has a, you know, a portfolio of properties, if you can create a 2, 3, $4,000 depreciation, that’s a pay per loss. Well, now all of a sudden, we have a huge benefit, and we can maybe get an immediate refund, right. So, yeah, certainly, there’s a lot of planning that are available for real estate professional. I mean, the strategies are not new, you know, cost segregation, depreciation, bonus depreciation, those are all things that you know, we kind of have used in years past. But this will be an interesting year to see whether or not we want to do it because CARES Act allows us to do it. But it’s a choice of, you know, is that the right time to do it, assuming taxes will increase in the future?

Bruce Norris  Cost segregation, just briefly talk about that. And then I want to ask about if you’re, if you have to, at some point recapture, you sell something and you, you don’t 1031 exchange it? What’s the tax bill for that?

Matt MacFarland  Right. So, cost segregation is deals with depreciation on, on people’s rental properties, commercial, residential, doesn’t matter. But essentially, you know, with rentals, as you guys know, obviously, everyone gets a standard calculation of depreciation expense every year, we’re writing off a percentage of your purchase price of the building every year, with a cost segregation, all it does is going in and looking at the building and trying to figure out ways to break out components that are building that should be written off over a shorter period of life or a quicker time period, then 27 and a half years and 39 years. So, essentially, all cost segregation doing is bringing more depreciation to the forefront. So, you can take it sooner than later, you get you know, you get the same amount of depreciation over the life of the asset is just how do we take more of it sooner than later, so that we can get our write offs now save our taxes now, reinvest that into, you know, better, you know, more performing assets, all that kind of good stuff.

Bruce Norris  And if I did sell it, and I had to pay the tax bill, what’s the recapture tax on that?

Matt MacFarland  Yeah, if you do sell it, and you don’t do an exchange, there is recapture tax, it can be 25%. It can be ordinary income kind of depends on what, what the items are, that were sold and appreciated. And you know, but there’s also strategies on the back end, when you sell things to kind of maybe really reallocate the sales price to some of the more of the sale price of the building and less than the personal property. So, you’ve got less recapture. There’re different things people can do.

Amanda Han  Yeah.

Bruce Norris  Okay. Just a couple other questions in 2020. I know this rule was passed a while ago, standard deductions got raised. They’re still in place. So, what’s the standard deduction, let’s say for a married couple, and they also limit your ability to write off the state tax and the whatever else it was, state tax and..

Matt MacFarland  Property taxes.?

Bruce Norris  State tax and Property taxes.

Matt MacFarland  Yeah. So, standard deduction for 2020 is, is around I don’t know the exact figure, but it’s around 24, 25 grand for a married couple.

Bruce Norris  Right.

Matt MacFarland  It’s, they changed it a couple of years ago. More people are using it, you know, at least in our, in our firm, more people are using it than they were in the past. But it’s still for I think, for our clients, probably a majority of people are still itemizing just based on the numbers. I don’t know, maybe 20% of our clients use a standard deduction, that’s..

Bruce Norris  Okay.

Matt MacFarland  But again, if you know, if you if you have more than 25,000 itemized deductions, you’re going to end up using that than your standard deduction.

Amanda Han  Yeah, I think that means, you know, for people who live in California, you know, that own a home mortgage interest is still, you know, that’s still a fairly large expense, people who are making donations, that’s still fairly large right off. So, that’s why we still see a big chunk of people that are still itemizing. But certainly one of the biggest tax changes that came out, you know, in 2018, under the Tax Cut and Jobs Act was this $10,000 limitation on primary home property tax and, you know, a state income tax. So, that’s a huge limitation that really impacted a lot of taxpayers, especially for states like California.

Bruce Norris  Absolutely.

Amanda Han  Yeah. So, I think, looking ahead, 2021, there are signs that, that might be reversed, where we are now again, able to take tax deductions without limitation for property taxes, and, you know, state income tax, but we’ll see, right? That’s one of those potentially good news that…

Bruce Norris  Yeah. On a year that has maybe not very many, that’s the good news. All right, I’m just going to go down like a list. And I know, nothing’s been decided on these, but give us your take on when you go to these meeting., what’s the, what’s the mood about? And what’s it? What’s it likely to go to, so, current top tax rate for personal taxes is?

Matt MacFarland  Right now, it’s 37%.

Bruce Norris  And, and you think, or what is being discussed now about it might change to what?

Matt MacFarland  So, they talk, the talk that the Biden Administration kind of was throwing out there during the election and everything is that they’re planning to push it up to 39.6%. And that would be for people, you know, making, making over $400,000 as a married couple. So, that would be a big, big change from where it currently is. Because at $400,000 you’re probably only paying, you know, top into the 32% bracket maybe getting into 35% right now.

Bruce Norris  Right.

Matt MacFarland  So, it would be a big change for those people on the higher end of $400,000.

Bruce Norris  Okay, current top corporate tax rate.

Matt MacFarland  So, right, a couple years ago, they changed it to a flat rate of 21%. There’s talk that they want to increase that from a flat 21 to a flat 28%.

Bruce Norris  That’s like 30 plus percent.

Matt MacFarland  Yeah, no, I mean, you know, and five years ago, whatever it was, you know, that was a graduated scale with the lowest one was 15%. You know, or.

Bruce Norris  Yeah.

Matt MacFarland  Other than 0%, obviously, but I mean, so yeah, it’ll be interesting to see if that goes through.

Bruce Norris  The current capital gains tax rate.

Matt MacFarland  So, it’s a kind of a graduated scale from the capital gains rate. Most people pay 15%. Some people pay 20%. If there, if their income is above, you know, around $430,000 for a married couple, they’re going to pay 20% on, you know, some or, you know, all their capital gains. But the proposal I, if I remember correctly, the proposal they’re talking about is, is increasing that rate on capital gains of 39.6% for people making over a million dollars.

Bruce Norris  Right.

Matt MacFarland  Now, my understanding that it’s a million of taxable income, but you know, is that where it finally falls out? You know, is it a taxable income? Is it a gross income? Is it an AGI. You know, I mean, who knows?

Bruce Norris  Yeah, could you, could you could sell an apartment building and have a million-dollar.

Matt MacFarland  Yeah, yeah. I mean, it’s not Yeah, it’s not hard, depending on your portfolio, obviously.

Bruce Norris  Okay. Collecting Social Security tax on earners that make over 400 grand. That’s something that they’re talking about.

Matt MacFarland  Yeah. So, that’s one where you know, right now, everybody’s Social Security tax kind of their wage base, if you will, caps out it, I think the 2021 numbers around 142,800, something like that.

Bruce Norris  Yeah.

Matt MacFarland  If this goes through, they want to bring it back once somebody’s income reaches $400,000. Now, wait, these would-be wages, because this is what it’s applied on. So, basically, if somebody makes $500,000 a wage, they’d be having Social Security tax on the first, you know, 142. And then the last 100,000, over above 400, they’d have a, you know, the amount in the middle that we call like a donut hole. They wouldn’t have any Social Security tax on that’s what, that’s what I’m reading at least.

Bruce Norris  Yeah, I think you’re right. But that’s not a little, that’s not a little tax. What’s..

Matt MacFarland  That’s the thing. I mean, we’ve, you know, we’ve, you know, you got clients that, you got clients that have RSU stock options, they, you know, they exercise them, and them it goes up by a million bucks because of the stock they received. I mean, that would, that would count towards that tax, you know.

Bruce Norris  Okay, now, the way social security tax is paid, it’s typically split by an employer.

Matt MacFarland  Yeah, I mean, yeah. So, that they would you know, the employer pays half of it, the employee pays half of it. But you know, for those people who are self-employed they..

Amanda Han  Yeah, I think the pros and cons, we have a lot of clients who are self-employed. So, if they have their own S Corp or C Corporation, you know, the downside to that is you are the employer and the employee, so.

Bruce Norris  Yeah.

Amanda Han  Theoretically, all 15% is still coming from your pocket. The good side of it, though, is that there’s a lot more planning opportunities, we can say, well, let’s reduce our payroll to stay under the threshold and take out more as dividends or more in terms of, you know, write-offs. So, there’s more strategies there versus you know, a true employee, obviously, you’re not going to tell your employer to reduce your compensation to save on taxes.

Matt MacFarland  No, you want to, Joe, you want to reduce your compensation?

Bruce Norris No.

Joey Romero  Yeah, I’ll have a meeting with Bruce right after this about that.

Matt MacFarland  That’s the scale on Security taxes.

Bruce Norris  Medicare, is that all? Is that always being charged on every dollar at this point?

Matt MacFarland  Yeah. So right now, the Medicare tax is taxed on every dollar of your earned income. So, haven’t heard anything that that’s going to change.

Amanda Han  That’s a small piece of it. That’s the…

Bruce Norris  Yeah, that’s only 1% or something like that. Okay. So, when they make tax law changes? Well, I guess since none of it’s in place already. Do you think the tax law changes will be implemented in 2022?

Amanda Han  Um, yes, I mean if there’s going to be changes, you know, we feel that the natural place to do it would be starting in 2022. Just because there’s a lot, you know, other pending, other more urgent things that maybe the government’s working on in terms of COVID-19 unemployment, you know, stabilizing the economy and things like that. But, you know, it’s anyone’s guess. I mean, in the past, there has been retroactive tax changes as well, where something passes in 2021 could be retroactive to the 2020 year, right. I mean, it’s highly, highly unlikely, but, you know, if we look at it historically, those are things that that has occurred. And also, there is, you know, there is a possibility that some of these changes, you know, with respect to rates and things like that be applied retroactive to January 2021. You know, that’s more likely than going on all the way to 2020. So, yeah, some of the possibility of 2021 changes, but hopefully 2022 and beyond.

Matt MacFarland  Or maybe, or maybe they’re staggered, and you know, they’re they pick a few of them. You know, I think if, I don’t, I think if you look back at the kind of the first year of past administrations, they have tax law changes isn’t usually the one of the biggest items on the table, if I remember correctly, but you know, it’s, yeah, it’s kind of a it’s a, it’s a guessing game, obviously, to some extent.

Bruce Norris  The retroactive tax that’s, you know, I sent you, I guess I sent, Joey, he sent you some questions that I came up with, and that, that one is kind of interesting, because I spent the morning reading. And one of the things I kind of came up on some interesting tax proposals that’s coming up for a vote in August in California. And this is where you’re going to if you’re making over $5 million in income, that your state tax will go to 16.8%. And it will be retroactive for the entire year.

Amanda Han  Yeah.

Bruce Norris  And, go ahead.

Amanda Han  I was gonna say things like state tax rates, you know, it’s either going to be go forward or retroactive, because you can’t really have a mid-year change, right? We can’t say income earned after September 1 is a new rate. So, yeah, things like that are usually…

Matt MacFarland  I mean they could if they really want to complicate things.

Amanda Han  But rates are usually you know, for the year by, you know, other things like maybe 1031 exchange, more transactional ones, you, you know, typically we see those as of a specific date.

Bruce Norris  Well, what’s, what’s interesting about that picture, as I’m not sure now it says it gets voted on in August, I’m not sure who vote, who gets to vote on that. If it’s the state of California, it has, I think it has to do with legislators. So, I’m painting something. And this is like, when I opened the conversation with you guys, I went down and said, what percentage of taxes were paid by top 1%? In California, 40% of the income taxes paid by the top half of the percent, 40%. Now, if what we’re kind of contemplating, let’s say you’re one of the $5 million guys who’s paying 40% of this stuff, you now have the chance to have a tax rate of 39%, plus, state tax is 16.3, plus a Social Security tax. Of what, seven and a half.

Matt MacFarland  Yeah, are, you know, and then you got net investment income tax of another 3.8%? If you’ve got a lot of net investment income, I mean, yeah, it’s.

Bruce Norris  You’re at 62 to 65%.

Matt MacFarland  That’s an opportunity right there.

Bruce Norris  Yeah, you’re going to need to talk to some billionaires, buddy. Really, average net worth of your clientele pretty quick.

Amanda Han  Yeah. I’ll share something really interesting. The, you know, we get, we, we sign up for a lot of, you know, CPA classes ourselves, like I was saying, and there was one earlier this year, that was about relocating out of California. How do individuals do it? How do businesses owner, that class was sold out almost immediately? When it was released. And then I talked to, you know, we talked to I mean, we talked, we talked to clients on a weekly basis. And, you know, I mean, every week, there’s got to be a handful of people who are either have already moved out of state or are in the process or looking to move out of state. So, yeah, certainly, you know, like, you’re asking, what is the mood? The mood is that you know, that we all need to be looking ahead proactively in what’s coming down the pipeline.

Matt MacFarland  Yeah. One of the one of the things interesting on that California tax increase, and, you know, I think California is also contemplating like a wealth tax of…

Bruce Norris  That was my next question.

Matt MacFarland  .4% or something, right. One of the trends we listened to or attended last week, they were saying, you know, these were on the table last year, and they put them on hold. But the caveat at the end was, don’t get too excited that you know, it’s gone away, that it basically is just being delayed, like, as you said, probably till, you know, you found the August date, right, that they’re contemplating, you know, re, re-voting or whatever you want to call it on these things. So, yeah, it was on table last year, they kind of put on hold for, you know, whatever reason, right, but, uh, yeah, I think it’s coming down the pipeline and they want to re, re-discuss it, but yeah, I mean, that’s crazy. That’s, like you said 60, 65% of your, if you’re making over those top levels that you’d be giving away to the government. Um, it’s…

Bruce Norris  Yeah, it’s just, you know, contemplating your, when you think about net revenue. Well, we’ll talk about that in a minute. I just..

Matt MacFarland Did, our friend, did our friend Harry called when we had our event in November, he called a confiscation, I think was his word.

Bruce Norris  Yeah, that was he wasn’t happy. That’s right. I don’t think we get to vote on that stuff. You know, that’s one of the things that I wanted to ask. But, you know, I think we both don’t know for sure. But I don’t recall getting to vote on my tax rate. So, I think that’s a congressional vote.

Matt MacFarland  Yeah, probably.

Bruce Norris  And it’s usually dominated by, you know, if you’re going to reduce it, there’s no Democrats to vote for it, and almost all the Republicans, and if you’re going to raise it, it’s probably just the opposite. So, that, the odds of getting a higher tax rate coming our way, if that’s the way the vote goes, is probably pretty likely. Here’s a list of taxes. So, or changes tax code they’re being talked about, one of them was wealth tax. Now, when the state of California dreamed that one up, I had a pause moment and go, Wow, I didn’t even know a state could contemplate that. I had thought maybe that would come from the US. But I had no, no idea the state could dream it up. And maybe even simultaneously.

Matt MacFarland  Yeah, it is interesting, because you’re right. I mean, think of it naturally as coming from like, the top-down, right? Like, you know, we’re going to, where the states are going to base their decisions, you know, the start the federal is a starting point, right. And then we either agree or disagree with that, but not necessarily that they can come up with their own thing, right. I mean.

Amanda Han Well, I mean, I think California is notorious for having our own set of rules with respect to, you know, almost everything. And so, for us, we have to take trainings, from the tax filing sides, specifically for California, you know, real estate, for example. At the federal level, we there’s a loophole for real estate professional, where you know, in regardless of how much money you make, if real estate is sort of your full-time gig, then you know, you might be a real estate professional and use the losses to offset other income. California has never recognized that. And it’s a shock to a lot of clients, because, you know, they just don’t understand why, or even, you know, bonus depreciation, we can write off 100% of assets for the IRS, and California says, No, can’t do that. So, there’s all these things. I mean, you know, it’s gotten sort of crazy, where we’re doing two completely different returns, you know, almost like for two different countries, if you will.

Bruce Norris Yeah. Well, capital gains is like that, right? You have a capital gains tax that’s less than the individual. But in state, it’s just the same thing, right? It’s an individual number.

Matt MacFarland  Right, right.

Amanda Han  California, it doesn’t have a lower tax rate for capital gains.

Bruce Norris  This was floated in front of me. And I thought, wow, that’s an interesting one taking stock gains without having or having to declare stock gains without actually selling the stock. Just the fact that it went up. Is that is that been contemplated?

Amanda Han  Yeah. I mean, we, we, they didn’t talk a lot about that in the trainings we’ve attended. But yes, that’s, that’s something that has been discussed in the past. So yeah, that is kind of a scary road to go down. Because I think, you know, again, just looking at some of our clients, like in, you know, that are in the in the tech space, you know, I mean, those stocks are very valuable. So, it’s kind of forces you to sell right? Forces you to sell the stocks, just to pay the taxes on it. And, you know, I mean, hopefully, you know, that doesn’t come to fruition. But what if that starts to apply to real estate where you have a revaluation, you know, let’s start paying gains on real estate appreciation…

Bruce Norris  Let’s, let’s get into the appraisal business, because every asset would have to be I mean, real estate, how would you determine when it went up? You’d have to have an appraisal.

Amanda Han  Yeah, I mean, I regret even saying that because I feel I don’t want any ideas for that. So, Joey, let’s edit that out.

Joey Romero  I was about to ask you about Bitcoin, what kind of, what kind of good news is coming that way?

Matt MacFarland  No, that’s, that’s actually one of those that’s probably tax more in line with what Bruce is discussing that things just change in value that you get tax. So, you know, I don’t claim to be a Bitcoin expert by any stretch of the imagination, but.

Joey Romero  I don’t think anybody is.

Matt MacFarland  There’s like five or six questions we have to ask clients about they’re like, did you mind it? Did you exchange it for some other coin? Did you do this or that.

Amanda Han  It’s a new term called airdrop or something. That he pay taxes on this airdrop, I’m not sure but yeah, similar thing. I mean, they’re usually treated like the stocks so, currently if you sell it…

Matt MacFarland  If you use it like that, but if you use it as like, monetary you know, to buy something like you know, buy something from the store. You can get taxed on the change in value. It’s, It’s crazy.

Bruce Norris Oh, yeah, of course. I never thought about that. Yeah.

Joey Romero  That’s the only reason asked, because it’s a roller coaster. It’s been you know; I’ve mean in the morning it could be $10,000 different.

Matt MacFarland  So, so, one interesting takeaway is that I learned from this thing that my, our nine-year-old son was excited to find out was that the vbox and Roblox you get from these virtual online gaming games are not considered virtual currencies. So, he does not have to report that.

Joey Romero  Nice. You mean a sidetrack is there.

Bruce Norris  That’s okay. 1031 exchange rules, do you think they’re going to be touched?

Amanda Han  Well, you know, the 1031 exchange rules were touched back in 2018. It’s just not something that we talk about a lot. So, under the tax cut, so before the Tax Cut and Jobs Act, you can use a 1031 exchange to defer other assets and not just real estate. So, certain business assets, if you sold it, you can defer it. Common example is a car, you buy it, you have a business car, you sell it, you buy another business car, you can do a 1031 exchange. So, but, but starting in 2018, under the Tax Cuts and Jobs Act, they took that away. So, So, since then, 1031 exchange was only available for real estate investment properties. But yes, there are, you know, talks floating around of potential changes. And, you know, I feel like it’s highly possible that there are some changes to it. What exactly are the changes? We don’t really know yet.

Matt MacFarland  But yeah, that’s interesting, because I don’t think that one was as specific during kind of the run up to the election and all their discussions in the proposals, as was a specific 39.6%, high highest tax rate or changing capital gains. And so, those were very specific things they talked about the 1031, I think was, it’s out there, but it was, you know, so for whatever that’s worth if it wasn’t as specific, you know.

Amanda Han  And we didn’t know if that meant it was going to be limited or not allowed for people making over 400,000, or if that’s just going to be gone, you know, permanently. But obviously, our hope is that, that stays, because I think you can imagine if they take away 1031 exchange, they increase the capital gains tax rate, you know, they take away the step-up basis, then that’s, you know, a whole slew of major tax changes that will impact real estate investors. You know, we sell, we can’t afford the tax, and then we have to pay that 39%.

Bruce Norris  Yeah, but you know, that’s, it kind of raises the next obvious question. So, would it? Would it impact those types of assets ever being sold again? Heck, yeah.

Amanda Han  Yeah. And I think the timing is important, too, right? If they come out and said, Oh, you know, as of today, retroact- being I guess, you know, as of February 1, there’s not going to be any 1031 exchange, then I agree, agree with you probably know, you know, a significant decrease in movement. But if they said, you know, effective 2022, there won’t be 1031. And the capital gains will go up.

Matt MacFarland  And it’ll go up if you don’t sell an asset. I mean, we can go.

Amanda Han  Yeah. And so, I think, yeah, you’ll see a very significant number of transactions where people are really analyzing their portfolios and saying, where am I, what do I see myself in the long run and get rid of all the other ones before the end of the year?

Matt MacFarland  I think if that happens, you’re going to see Bruce’s fly from California to Florida continue on to like Switzerland and the Grand Cayman Islands or something like that.

Bruce Norris  No.

Joey Romero  And that’s going to do it for part one of our interview with Matt McFarland and Amanda Han of Keystone CPA. Tune in next week for part two. Thank you.

Narrator For more information on hard money, loans and upcoming events with The Norris Group, check out For information on passive investing with trust deeds, visit  The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go and click the Hard Money tab.




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