With Year-End Upon Us, What Year-End Tax Planning Strategies Do You Use?

[Bill Exeter]

With year-end and the holidays rapidly approaching, I thought it might be helpful for investors to share year-end tax planning/tax management strategies with their fellow investors.  We often get so busy at this time of year that we forget to think about tax planning strategies that could help us manage our tax liabilities.  How/what do you do to minimize/manage your taxes?

[Dave Toelkes]

Bill,

I assume your question is limited to tax reduction strategies related to our real estate activity.  In that vein, here are a few that some might consider useful

1.   Paying the January mortgage payment in December so the interest is deductible this year may generate a little higher interest deduction.   

2.  Refinance a rental property for a lower interest rate or for a lower payment.  Then, any unamortized loan fees from a prior refinance can be realized in full for a higher interest expense on Schedule E.  

3.   Many investors bypass the home office deduction because of the "red flag" it raises for an audit.  However, no one should be afraid of an audit if they have a legitimate home office. 

4.  Do not ignore depreciation.  It will be taxed eventually as unrecaptured depreciation whether or not the depreciation expense was taken.    

5.  Start tax planning now for next year.