Here are 5 reasons why I would not buy rental properties in California:
Too many people buy rental properties in California simply because they live there or because they love the weather.
#1 California does not recognize Real Estate Professional Status. They are the only state I’m aware of that does not recognize that.
#2 They don’t allow bonus depreciation.
#3 California has a “Clawback rule” for 1031 exchanges. In short, if you go from a 1031 exchange property in California to another state and then you ultimately have a taxable sale in the future, they will clawback some of that tax.
#4 They have an $800/year minimum LLC fee. And it will only go up from there.
#5 They have the highest marginal state tax rate. - 13.3%
So if you’re considering buying or selling rental properties in California, you should first go to www.therealestatecpa.com/ryan and fill out the online web form to see if we can help you save more on taxes.
