Real Estate Tax Planning Tips

[Julio Gonzalez]

It’s extremely important in any business to ensure you are maximizing your tax deductions. Real estate investing comes with A LOT of potential tax deductions and credits to take advantage of. Here are some tips on how to make sure you are doing this!

1. Does your CPA specialize in tax planning in addition to compliance? Do they also specialize in real estate taxation?
   1. Having a CPA that specializes in your industry is absolutely crucial to ensuring they help you take advantage of the most tax credits and deductions possible. It’s important to note that your CPA may not perform all of the specialty tax services themselves, but make sure they work with specialty tax firms so that you are still able to take advantage of these credits.
   2. It’s great to meet with your CPA at the beginning of the year to discuss your tax plan together. If your CPA specializes in tax planning, they should be able to help you assess all of the possible tax deductions and credits and how to take advantage of them. If your CPA doesn’t provide tax planning, either switch to one that does, or make sure you are talking to another specialist to help with this. Tax planning is crucial in the real estate industry.
2. Do you currently have a tax plan and strategy in place? When was the last time you updated this plan? What do you do to track your progress with your tax plan?
   1. Make sure you don’t make a habit of waiting until the end of the year to try to tax plan! Ensure your tax plan is updated at the beginning of each year and that you have a process for monitoring if you are on track with the plan. Tax planning is like a budget - it’s great to have one and have a plan all set out, but unless we are staying on track with it and constantly assessing it throughout the year, it won’t serve its purpose.
3. Have you considered specialty tax credits?
   1. There are lots of specialty tax credits in the real estate world. Depending on what your long-term real estate investment strategy is will help determine which credits you should consider. Here are some of the tax credits and strategies: Cost segregation studies, bonus depreciation, historical tax credits, 5G Rooftop leasing, 45L tax credits, 179D tax credits, opportunity zones, Construction tax planning, Real estate asset disposition studies, Reserve studies, and Tangible property repair regulation.
4. Is your accountant aware of your tax plan?
   1. You should be working hand in hand with your accountant on your tax plan. They need to be aware of it so they know how to book certain entries or classify certain purchases. For example, if your accountant doesn’t know you had a cost segregation study performed, they will be depreciating your properties on a straight-line basis. Or maybe you can utilize the tangible property repair regulations to expense a roof repair, but your accountant isn’t aware of this plan and capitalizes it. While yes, this can be cleaned up at the end of the year, it’s important to have your books clean throughout the year to be tracking your profits or losses to help minimize any surprise tax impacts.

What are your tax planning tips?