Year-End Tax Tips for Landlords: Maximize Savings and Prep For Tax Season

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As 2024 winds down, landlords have a golden opportunity to optimize their tax situation before ringing in the new year. Thoughtful planning right now can lead to significant savings come tax season. Here’s a step-by-step guide to ensure you’re prepared—and how financial tools like Baselane can simplify the process with automated bookkeeping and a tax package tailored for real estate.

Organize Your Records With Automation

We all have plenty of things going on at the end of the year, and taxes are probably not at the forefront of your brain right now. Between holiday shopping, family events, and watching Home Alone at least twice, you probably won’t consider ensuring your bookkeeping and accounting are handled appropriately. 

Before diving into deductions or strategies, ensure your financial records are in order. Disorganized books can lead to missed deductions, errors, or even audits. 

Baselane’s automated landlord accounting and bookkeeping features remove the guesswork of recordkeeping. The platform categorizes transactions in real-time, organizes them into tax-ready formats, and eliminates the need for manual tracking. By year-end, your financial data is already prepped, saving you countless hours and ensuring you don’t miss a thing.

Review Your Deductible Expenses

The IRS allows landlords to deduct a variety of expenses, including:

• Mortgage interest
• Property management fees
• Repairs and maintenance
• Utilities
• Depreciation

Take the time to review your expenses and ensure everything is accounted for. Your financial tools need real estate-specific categories for expenses like repairs, utilities, and marketing costs. You should then be able to export these records directly into a tax package at tax time, ensuring a smooth filing process.

Prepay Expenses for Next Year

If you have extra cash flow, consider prepaying certain expenses before the year ends. This could include:

• Insurance premiums
• Property taxes
• Maintenance or repair costs

By prepaying these expenses, you reduce your taxable income for the current year. Real-time cash flow insights are critical; they allow you to easily see if you have the flexibility to make these prepayments without straining your finances.

Take Advantage of Depreciation

Imagine if an asset can go up in appreciation value while also being able to say it is losing value in areas. That is depreciation. 

Depreciation is one of the most significant tax benefits for landlords, allowing you to deduct the cost of your property over its useful life. Ensure you’re taking full advantage of this deduction by accurately calculating depreciation for each property.

Check for Qualified Business Income (QBI) Deductions

If you’re operating your rental properties as a business (and you should be), you may qualify for the QBI deduction, which allows landlords to deduct up to 20% of their qualified business income. To qualify, you must ensure your rental activity meets specific criteria, such as being treated as a trade or business for tax purposes.

Automated accounting lets you quickly document hours worked and expenses incurred, helping you meet the IRS’s requirements for this valuable deduction.

Consider Capital Improvements

Unlike repairs, which are deductible in the year they’re incurred, capital improvements (like adding a new roof or upgrading HVAC systems) are depreciated over several years. However, these investments can increase your property’s value and offer long-term tax benefits.

The best property tax management software should make it easy to distinguish between repairs and improvements, ensuring accurate reporting when it’s time to file.

Prep for 1099s

No one truly wants to pay taxes, but you also don’t want to get stuck footing the entire bill at the end of the year. If you’ve paid independent contractors or service providers $600 or more during the year, you must issue them a 1099 form. Your financial software should simplify this by organizing your payment records so you can quickly identify who needs a 1099 and prepare the forms without digging through scattered invoices.

Plan for Next Year With Real-Time Insights

Taxes aren’t just about looking back—they’re about planning ahead. You benefit greatly from real-time insights, allowing you to project your cash flow, monitor your property’s profitability, and prepare for upcoming expenses. 

Why Baselane Is a Must-Have for Landlords

Baselane is more than just a bookkeeping tool—it’s a comprehensive financial platform designed for landlords. Here’s how it can help you save time and money during tax season and beyond. Here’s how:

• Automated bookkeeping: No more manual tracking. Baselane categorizes income and expenses in real-time, saving you hours of work.
• Integrated banking: Easily organize finances with virtual accounts, send and receive payments, and sync external banks and cards into a consolidated ledger of all your transactions.
• Tax-ready packages: Export tax-ready financial reports with just a click, ensuring a smooth filing process.
• Real-time cash flow insights: Monitor your finances year-round and make informed decisions for investments and tax planning.

With Baselane, landlords can take the stress out of tax season and focus on maximizing returns.

Final Thoughts

Year-end tax planning doesn’t have to be a headache. By staying organized, leveraging automation, and taking advantage of tax-saving opportunities, landlords can confidently reduce their tax burden and enter the new year in good financial shape.

Financial tools like Baselane simplify the entire process, from automated bookkeeping to tax-ready reporting. If you’re ready to save time and make tax season stress-free, Baselane is the partner you need.

Start preparing now, and let automation do the heavy lifting. Your future self (and wallet) will thank you. Now, you can spend more time figuring out how not to burn the ham this year.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.