When do I need a REI-focused CPA

Question

Hey community -

Struggling with when we need to bring on a CPA who is REI-focused. Our current CPA has done our taxes for several years (W2 and small business income) and we believe they've done a good job. We purchased our first REI this year which was a 2-unit MF and we turned one of the units into a STR. We are trying to determine if we need to go with a new CPA that has deeper REI experience and we want someone to give us advice on the best strategy to reduce our tax liability - specifically things like material participation as we are doing all the work for the STR.

Any advice on when/if we need to pivot to a REI-focused CPA? Any help would be greatly appreciated as we start our investment journey. Thanks!

Jeff Davis · Answer

Ok. This helps add some clarity to how we should be thinking about the cost seg route.

Jeff Davis · Answer

Thanks, Michael! This content is indeed helpful in us thinking through our situation.

Jeff Davis · Answer

Thanks @Bonnie Griffin Kaake. Helpful info. When you say "no cost" cost segregation can you tell me a bit more? I thought these sorts of reports where expensive to conduct and that I need to weigh the tax benefit versus the cost. Am I missing something?

Account Closed · Answer

Engaging a Real-Estate oriented CPA would be highly recommended and beneficial. Real estate tax law is complicated and we as real estate CPA's understand the code inside and out. We spend countless hours staying up to date and can be of greater help in getting you the most deductions and reducing your tax bill based on your investing strategies.

Jeff Davis · Answer

Sounds good,@Charles Tarantino. Thanks for the added perspective.

Charles Tarantino · Answer

The sooner that you bring in a CPA specialized in real estate the better. The strategies specific to real estate can be complex and nuanced. It is best to have an advisor that understands and frequently uses these strategies so that you don’t miss out on valuable tax deductions.

Michael Plaks · Answer

@Jeff Davis

This post may answer your question partially:

https://www.biggerpockets.com/forums/51/topics/1088325-expla...

Bonnie Griffin Kaake · Answer

Yes, Jeff, you are missing something. The estimate/pre-analysis is at no cost and gives you the information you need to decide if a study is going to help with your specific tax situation. They also tell you how much the study will cost if you decide to go forward.If you pay no taxes, are going to sell the property within a year or two, or paid less than $200K for the property, it may not be worth going forward. We make it easy for your CPA/tax professional to review the information and implement the study results for you. This is a specialty niche for CPAs/tax pros so they may likely need some guidance. I teach Continuing Professional Education (CPE) classes to CPAs because we need more of them to understand how this helps their clients. Why pay more in taxes than you need to pay? When you are getting estimates for cost seg, be sure you are comparing apples with apples. Review the fine print.

Bonnie Griffin Kaake · Answer

@Jeff Davis My recommendation would be to start interviewing possible real estate savvy CPAs now. They are always busy since there is a shortage of them. Also, get an estimate on cost segregation (no cost) as soon as possible to take advantage of the tax benefits and added cash-flow for 2023. Let me know if I can help or answer any questions for you.