Hello and welcome to the good, the bad, and the ugly about being a 1099 CRNA. But isn't that just how life is? There's always some good and always some challenges. This action-packed course is going to walk you through what is a CRNA home loan, why some independent contractors have trouble getting mortgage financing, how to overcome those challenges, and then we're going to get into some benefits of homeownership, including some tax benefits, some tax exclusions, and even a way to reduce or potentially completely eliminate your federal tax burden. So without further ado, let's jump straight into the presentation. Why is it that getting financing as a 1099 independent contractor CRNA can be challenging? Well, it's because of the Dodd-Frank Act and the CFPB. You see, back in 2010, in the wake of the Great Recession and the mortgage meltdown, the Consumer Financial Protection Bureau was born. And part of the Dodd-Frank Act that is enforced by the CFPB is the ability to repay rule. This ability to repay rule requires lenders to consider a borrower's ability to repay a mortgage loan before extending credit. And in fact, this act made it illegal for a mortgage lender to write a loan on an owner-occupied property if we cannot prove a borrower's ability to repay that mortgage indebtedness. And so as a 1099 independent contractor, that can be difficult because there's deductions, perhaps there's multiple jobs, there's change in income over the last two years, and that can make it difficult for an underwriter to prove a borrower's ability to repay. And that's why the CRNA 1099 mortgage loan was created. To overcome the challenges that so many self-employed CRNAs face as it relates to qualifying for home financing, these loan programs are designed specifically to accommodate the unique financial situations of self-employment for 1099 CRNAs, allowing you to secure home financing with fewer restrictions than conventional loans. Here's a few of the highlights for a CRNA home loan. You can qualify with as little as 5% down payment. Jumbo loan amounts are okay. So conventional loan limits in most parts of the country are just over $700,000. The CRNA home loans typically will go to jumbo amounts above that amount. They're available in 30-year fixed, five, sometimes seven, and 10-year fixed arms. What that means is that it's a 30-year loan with a fixed interest rate for five, seven, or 10 years. Credit scores on these programs are available as low as 620. So perhaps you had a student loan that didn't get transferred correctly, and there's a late penalty that's weighing down your credit score. No worries. These programs should still be able to help most of us. Existence of 1099 contracts showing guaranteed pay or one-year tax return is typically required. So if you're taking a new job and there's an hourly shift or monthly guarantee, we can use that in most instances to qualify somebody before their first day on the job. If they don't have that, then it's a production-based compensation plan, then likely would require at least one year's tax return. With 20% down, there are no tax returns or income documentation required at all. So let's say that you're a 1099 CRNA, you're paid based on production or some sort of metric that is not guaranteed, and you have not been in that job with consistent quote-unquote provable income for at least a year, no worries. You can still get financing for your home with a 20% down payment. Now, how do we get around, I just said that it's illegal for lenders to write a loan for a primary residence financing without proving your ability to repay? And then out of the other side of my mouth, I said, well, if you have 20% down, we don't need that. Well, let me elaborate. There's a special exclusion or exception to the Dodd-Frank Act ability to repay rule, and that's for community development financial institutions. These are institutions that essentially have committed to give a certain percentage of their loans to underserved communities, and those institutions get a carve-out or exception to the ability to repay. So we've partnered with several of these CDFI institutions, and they are willing, able, and currently making loans outside of the ability to repay rule. So that's why we can do it without, as long as you have 20% down, without the guaranteed income. Okay. Let's get into tax deductions. Why is it so valuable for a 1099 independent contractor, CRNA, to own a home? Well, because there's all kinds of deductions that are available to you. The first deduction you should know is your ability to deduct mortgage interest. And the mortgage interest that you can deduct has a limit. And according to the Tax Cuts and Jobs Act of 2017, there's so many abbreviations here, you just have to love them, the TCJA. According to the TCJA, you can deduct the first $750,000 of interest paid on that principal amount. And just to clarify that, if you had a million dollar home, you would only be, or a million dollar loan, you would only be able to deduct the interest on $750,000 of the million dollar loan. So they would actually go, your CPA, or you, if you were self-finding, would actually go in and calculate, hey, I have a 6% mortgage rate, I have a million dollar mortgage, but I know I can only deduct 75% of that interest on my tax returns. Another itemized deduction that you may take is a SALT deduction, which enables you to deduct both state and local property taxes against your federal taxable income. And the TCJA limits for SALT deduction is a maximum of $10,000. So even if you have state or local taxes on your home that are $25,000, let's say, you can only deduct up to $10,000. All right, capital gains taxes and exclusions. So one of the things we want to be sure you understand are what are the tax ramifications of selling a primary residence? And the answer is, it depends on how long you've owned the asset. So if you've owned the property for a year or less, you are subject to short-term capital gain tax. And as you might have guessed, the shorter the period you hold the asset, the higher the rate of taxes you're going to be liable to pay. So the short-term capital gains are generally taxed at your ordinary income tax rate. Ouch! So we want to avoid buying a primary residence and selling it within the first year, especially if you saw solid appreciation that first year, because the income from the sale of that property or the gain will be taxed at your ordinary rates. And just to give you an idea of what that is, here's your short-term capital gain rates for 2023 based upon your different tax brackets and different income ranges. Now, one thing to point out that many people don't understand is that the U.S. tax structure is a progressive tax structure. And a progressive tax structure is when your tax rate that you pay increases as your income rises. In the United States, the federal income tax is progressive, meaning that let's just take this graph, for example, and let's look at the married filing jointly section. And let's say that your income ends up from $190,000 to $364,000. So you're in this 24% range. Well, that doesn't mean that you pay 24% taxes. What it would mean is you're going to pay 10% tax rate on $1 through $22,000, 12% up to $89,000, 22% up to $190,000, and you're only going to pay 24% on income of $190,751 and above. So that's what it means to be in a progressive tax structure. But nevertheless, the downside of this could be, let's say you were in this 24% range. Let's just say you had $300,000 in income. So you're in the 24% range. And then you sold a home after owning it for one year or less, and you had a $200,000 gain. That would push you into the 32% tax racket, and you would pay the 32% on that entire gain. Ouch. So you want to be really aware to consult with your CPA before making a decision to sell a home in less than two years. Okay. Well, what if you sell a home after one year, but less than two years? Well, then you are eligible or liable, rather, to pay at the capital gains rate. And the capital gains rates are going to be lower than your ordinary income, very likely. And so those ranges are depending, again, on your income. So for most of us, we're going to be either in the 15% to 20% range, which is likely less than ordinary income, but it is more than exempt. And exempt is really what we're looking for when we sell a primary residence. So let me walk you through, as long as you've owned the home for more than two years, and you've lived in the home for two of the last five years, then you can completely sidestep or exclude taxes up to these limits. So if you have been in the home two of the last five years, and you are single, you'll pay no capital gains tax on the first 250,000 profit. And if you're married, you can enjoy a $500,000 exemption. Anything over that is going to then fall into your capital gains, which we showed you on the last slide. Now here is a couple of key takeaways you should be aware of. You can sell your primary residence and be exempt from capital gains taxes on the first 250, if you're single, 500,000 if you're married, filing jointly. This exemption is only allowable once every two years, because you have to have lived in the home for two of the last five years. You can add your cost basis and costs of any improvements that you made to the home to the 250, if single, or 500,000 if married, filing jointly. What the world does that mean? Okay, here's what it means. It means I bought a home for $500,000, and I sold it for 1.1 million. So this is a simplified explanation, but let's just assume that gave me $600,000 worth of gain. But then when I go to my CPA, my CPA says, well, did you do anything to improve the value of the home? And I say, oh, yes. I put $100,000 into the backyard with a nice little pool and a gazebo. Great. Well, then that means you didn't actually profit 600,000 because you put 100,000 into the home. So that would raise your cost basis from the 500, you acquired the home, 500,000, you acquired the home to 600,000. You sold the home for 1.1 million. That's within your 500,000 married filing jointly exemption, no taxes due. So just be aware that if you've improved the value, that will increase your cost basis, which will help you sidestep some taxes potentially. And you must have both owned and lived in your home for a minimum of two out of the last five years before the date of sale. That's so important. One of the scenarios that we see quite frequently is that somebody will live in their home for let's say two, three, four, five years, and then they need to move out for a couple of years. They don't know if they're gonna come back. It may be due to job or children or parents, and they rent their home out and they move away. Well, if you move away for three years and you sell your home just inside of three years, you've still met the rule because you've lived in the home two of the last five years as long as you haven't been out of the home more than three years. Again, I am not a CPA or a tax professional. This information was found on the irs.gov website. It's subject to change. And I have validated this information with my tax professional that it's accurate for my situation, but I would encourage you to seek professional tax advice or clarification before making any financial decisions. Let's transition from primary residence tax benefits to investment property tax benefits. I believe that one of the fastest ways to become wealthy, to create intergenerational wealth is to own the medical office building that you practice in. And perhaps you get together with a couple of medical professionals and invest in a building. This is a real life case study of a medical office building that myself, my family, and a few of our partners purchased in Southern Utah. And I wanna walk you through the tax benefits that were attached to this benefit or attached to this property. So this property had a cost basis of about $12.1 million. This is determined by a tax segregation study, which we hired a professional that's designated to do this to come out for us to do. And this particular building, and the beautiful thing about a tax segregation is that you can categorize the different types of property. The IRS gives us code for this and different types of property are categorized into five-year property, such as flooring, wall covering, shelving, ceiling fans, seven-year property, meaning that the property or the broken down pieces of the asset has an expected economic lifespan of five years. And then seven-year property would have an economic expected lifespan of seven years, such as countertops, telephones, electrical for personal property, break room sinks. Then we have 15-year property, exterior lighting, landscaping, land improvements, fencing, carports. All of these different assets inside the building are broken down into five, seven, 15-year property. And then anything outside of that falls into 39-year property. And this is all used to determine tax deductibility and depreciation for your building as an asset. And what we found is there was $1.2 million in five-year property, 416,000 in seven-year property, 1.4 million in 15-year property. And we were able to write off in one tax year, the five, seven, and 15-year property through a tax segregation study. And then the 39-year property, we were able to write off that 39-year property gets amortized over 30 years. So in total, in year one of buying this property, we were able to deduct the 1.2, the 400, the 1.4, and then the 94,000, which is an amortization of the $8 million 39-year property. And in total, in year one, we took a write-off of $3,166,000. So that means the first $3,166,000 worth of income, no taxes due whatsoever. And for those of us who don't make $3 million a year, you have the benefit, the luxury of pushing that forward. Of pushing that forward. So if you only made $300,000 a year, you could push that benefit forward and you could use it year after year to offset your income. It's quite spectacular. Now, there are some limitations. I told this presentation's called the good, the bad, and the ugly. So I gave you the good. You don't need to pay taxes for the next 10 years in that scenario with your 300,000 income. But there is some bad and there is some ugly. So the Tax Cuts and Jobs Act, which includes 100% first-year deduction for the adjusted basis for the five, seven, and 15-year property, that is in effect for properties put into service after September 27th, 2017 and before January 1st, 2023. Well, it's now after January 1st, 2023. So this first-year bonus depreciation, as it's called, is being phased down. And so for properties put into service from December 31st, 2022 to January 1st, 2024, you can take 80% of that five, seven, and 10-year property as a one-year deduction. They call that bonus depreciation. Now you can only take 80% of it. And then the next year, it's gonna go down up to 2025. It's gonna go down to 60%, then 40%, then 20%. And then you would have to depreciate your entire building over 39 years. So what's the benefit of bonus depreciation? Well, if your income is greater than the normal 39-year depreciation schedule, you can take bonus depreciation. You can pull that depreciation forward to offset income in the year that you have a good income, a solid income year. Now, again, this is something that has some requirements to it. So let me walk you through what it would take to qualify. If your modified adjusted gross income is 150,000 or more, you generally can't use the special allowance. Wonk, wonk, I know, everybody's saying, well, why did you put this in the presentation? Okay, there's more than one carve out here. So here we go. Unless you or your spouse are a real estate professional. Well, what's the qualification? You qualify as a real estate professional for the year if you met both of the following requirements. And remember, if you're married filing jointly, you or your spouse need to qualify, not both. And one of you would need to qualify for these two requirements. More than half of your personal services, the personal services you perform, personal services means work, you perform in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated. That means your primary job has to be working on your investment properties. Now you're a busy 1099 CRNA. This is not going to be your primary job. So you're probably out of the picture unless you're considering retiring, but your spouse may qualify. And the second requirement is that you must perform, you or your spouse must perform more than 750 hours of service during the tax year in real property trades, working on your properties or businesses in which you materially participated and it's your primary trade or business. What does that mean? It means you have to spend 750 hours a year working on the management of your real estate assets and it must be your primary trade or business. So for me, this works beautifully. I work in the mortgage business, I work way too many hours and there's no way that anything else could be my primary business, but my beautiful bride, she works exclusively in our real estate business. And then of course, at home, taking care of kids, taking care of me, her biggest kid and her primary business of which she spends more than 750 hours is working on real property trades or businesses, which is the management of our rental properties. Now, there's one other exclusion you should be aware of. If your favorite investment type is short-term rentals, then there is a material participation exclusion. This is only valid for short-term rentals. So the material participation test, you says you materially participated in a trade or business activity for a tax year if you satisfy any of the following tests. And the test that most busy professionals, a 1099 CRNAs are going to qualify for is test number three, which says you participated in the activity for more than 100 hours during the tax year. It's only a couple hours a week. And you participated at least as much as any other individual, including individuals who didn't own any interest in the activity for the year. What that means is if you put in 100 hours on the nightly rental property, and you put in at least as many hours as any other contractor that you hired, then you can depreciate that asset and use it to offset your income. There's one more carve out here that says you may not use the home for more than 14 days personal use or it becomes a second home. So what's the end game? Presumably you have throughout your lifetime purchased a primary residence and you've written off the interest on the mortgage connected to that primary residence up to 750,000. You've deducted up to $10,000 of state and local taxes you've reduced your tax burden that way. And when you've sold real estate, you've done so in a way that you have escaped the capital gains by holding that primary residence for at least two of the last five years. Congratulations, you've become incredibly tax efficient. That means your net worth is higher and you paid less out in taxes. And perhaps you've even bought your own medical office building or nightly rental and you've used the tax segregation and depreciation strategies to reduce or completely eliminate taxes. But now we're looking at intergenerational wealth. We want to understand how do we transfer as much of our hard earned money, assets and life force onto our children without giving it up to the IRS? Well, the federal estate tax exemption, the amount below which your estate is not subject to taxes when you die is going up again for 2023 to 12.92 million. This means that when someone dies and the value of their estate is calculated, any amounts more than 12.92 million is subject to the federal estate tax unless otherwise excluded. And that is per person. So a married couple has a combined exemption for 2023 of 25.84 million. Now that is so important because you never want to sell an asset that has had massive capital gains before you die. Because when you sell that asset before you die, you have to pay the capital gains to the IRS. If you hold that asset until the day you die, then your children or heirs inherit that property with what's called a stepped up basis at whatever the value of the property was when you died and you essentially escape taxes up to 25.84 million. Hey, I hope this was very helpful and informative to you. If you have any other questions as it relates to CRNA, home loans, real estate, and ways that we've been able to help clients better understand how to escape taxes and avoid paying more than their fair share, I would encourage you to reach out to me directly. Thank you.

1099 CRNA

mortgage financing

self-employed

CRNA home loans

tax benefits

estate planning