To turbotax or not to turbotax

Tax, SDIRAs & Cost Segregation
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To turbotax or not to turbotax

Pete Fiannaca
Wholesaler · Henrietta, NY · Member since 2016 · 58 posts · 27 votes
Hey Everyone, Quick and relatively simple question. I own 1 SFR in addition to my primary home that I live in. With being so new to the game, should I consider using an accountant for taxes this year to ensure Im not missing out on anything, or is turbotax competent enough to help me out my first year dealing with a rental? Would love to hear from both sides of the aisle! Thanks Pete
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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    9y

    Hi @Pete Fiannaca,

    When a mortgage underwriter needs clarification about the way something appears on your tax returns, a human accountant will write that letter. Software will not. 

    My general rule of thumb (and obviously I'm focused on "what will screw with you getting a mortgage," so if that's not you, feel free to disregard) is that if your taxes are simple enough to use 1040ez, you're salaried W2, and you're taking the standard deduction rather than itemizing, go for it with the software. 

    If not, hire a human.

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  • Jared Boundy
    Real Estate Broker · Seattle, WA · Member since 2017 · 139 posts · 82 votes
    9y

    I've wrestled a little with this question myself, and may have made the wrong decision.  I've found TurboTax to work pretty well for me, as I've always thought the hardest part was getting all of your receipts and documentation together. Inputting it into the software is easy.  However, there are things that you can miss, in my case I missed taking depreciation.  So I'm using an accountant this year.  One other thing is that I believe you can deduct the cost of tax preparation, whether that's purchasing TurboTax or paying an accountant.  You might be able to do it yourself once you've been through it once with an accountant, or at least have an accountant look over your returns once in a while to see if you messed something up.  Just my 2 cents.

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  • Jamie Engledow
    Boca Raton, FL · Member since 2015 · 249 posts · 52 votes
    9y

    As an accountant I have seen many people "double dip" or on the other end miss out on expenses, deductions, credits, etc., because they answered a couple of questions incorrectly.  I suggest printing the hard copy tax return before you hit file and review it.  So many people hit the file button before they actually reviewed the return.  If you do not know what should be where on your tax forms, you are probably better with an accountant.

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  • Taylor Brugna
    CPA · New York, NY · Member since 2016 · 203 posts · 132 votes
    9y
    Pete Fiannaca Every accountant has seen his or her share of incorrect turbotax returns, and most enjoy fixing them:) In general, I think that real estate warrants the use of a pro. An accountant provides more value than just filling out a tax return correctly- they should be a trusted advisor and help you with planning. Hope this helps!
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  • Jorge Barboza Jr.
    Investor · Yorba Linda, CA · Member since 2016 · 114 posts · 32 votes
    9y

    First, thank you @Pete Fiannaca for asking this question because I have been struggling with something similar. Here is my story, I purchased a SFR to rent back in 2010 and have been renting it out ever since. I went from using TurboTax to H&R Block and most recently last year I used a private company recommended by a coworker. Now I am debating using one of the biggerpockets real estate focused CPAs. I want to get more aggressive with my investing; however, the cost is significantly higher. Also, I just got my real estate license and I want to sell/buy homes on the side considering it is a hard time to find deals and I have a fairly demanding W-2 job. What do you all think? Is now the time to step up into the big leagues? Is it better to get started now? Will I see the ROI? Any advice would be appreciated...decisions...decisions.

    Thanks!

    Jorge

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  • Jason MalabuteBusiness Member
    Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 899 votes
    11mo

    Hey Pete,

    I totally get the temptation to just use TurboTax—especially when you’re starting out and only have one rental. But here’s the thing: TurboTax is great for basic W-2 income and simple deductions, not for optimizing real estate tax strategy.

    When you own even one rental, you’re no longer a “simple return.” You’ve got depreciation, passive loss limits, basis tracking, expense allocations, and potentially cost segregation opportunities. TurboTax will walk you through forms, but it won’t tell you what you’re missing or how to legally minimize taxes.

    Malabute & Company CPAs525 Reviews
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