‘Tis the Season! Tax Tips for the Real Estate Investor

Yes, it is that time of year again. Time to get up close and personal with Uncle Sam. Every year when tax season rolls around, I can almost hear the collective groan of investors all across the city. And I get it. Taxes are a pain for the average person, but they become even more so when you’ve got real estate investments to add in.

That’s why I’ve put together these handy tips to help you navigate the waters of tax season as an investor. These are the basic guidelines I live by with my own investments, and they’ve served me well over the years.

Tip #1 - Hire an awesome CPA

Your accountant is your best friend during tax season, so you want a good one who knows what he/she is doing. Bonus points if you connect with one who specializes in real estate tax or is an investor themselves. When searching for this person, start by asking other investors who they use. This will get you started with a list of referrals, and you can vet them for yourself and choose the accountant who best meets your needs.

Tip #2 - Stay organized

I’m not here to pass judgement on disorganized people, but I will say this: investors who are disorganized make their lives unnecessarily difficult. This becomes even more true during tax season, when you need to produce certain documents and records. If you can’t easily access this information, you’re causing yourself an undue burden in the form of added time and stress. My recommendation is to keep detailed records of all your expenses and income, along with easy-to-reach copies of important files pertaining to your investment property. Quickbooks is a great tool for this, but there are other options as well. Find the one that works for you, and stay on top of it!

Tip #3 - Use tax laws to your advantage

Most people don’t think of taxes as being beneficial, but they most certainly are when it comes to rental real estate. There are quite a few advantages to owning this type of investment, and you can use tax laws to create a very beneficial situation for yourself. The big break comes in the form of depreciation on the property, and the fact that your profits from the property aren’t considered taxable income. There are other tax advantages as well, such as the 1031 exchange, so be sure to take to your accountant about which benefits apply to you.

Tax time really doesn’t have to be stressful. By using these basic guidelines, you can get through it with relative ease. So, hire an accountant, keep organized records, and don’t forget to take advantage of all those great tax benefits! Happy filing!