Have you ever met a Tax Smart Landlord? How to leverage your tax...

Our BP Meet-Up had another great guest this month. Ted Lanzaro is "The Tax Smart Landlord". For the past 24 years, his CPA Firm has saved its Real Estate Investor clients thousands and thousands of dollars every year on their taxes. He is a frequent speaker at real estate events.

This post is meant for your education purposes only. Please consult expert tax advice for your tax purposes. This post and the "tips" below are my interpretation from Ted's presentation.

The two quotes that stuck out to me: "Tax strategy has to be tailored" and "Whatever you concentrate on expands."

Ted is the Author of the Tax Smart Landlord. The book has 39 tax strategies for landlords and is broken into 4 sections:

• Basic Real Estate Tax Strategies
• Tax Strategies When Buying Real Estate
• Tax Strategies When Holding Real Estate
• Tax Strategies When Selling Real Estate

The following are Tips that we received at our meet-up.

Tip #1: Tailor your tax strategy based on your goals and needs.

Your tax strategy varies greatly based on your goal for the properties. For instance, buy and hold vs rehabber/flipper.

Here is a depreciation Calculation based on a 250k purchase:

Less: Amount Allocated toward personal property, see list of 5 year assets: 20,000.00

Building and land value = 230,000.00

Less: Land Improvements, see list of 15 year assets: 10,000.00

Remaining cost to be allocated among building/land = 220,000.00

Building 80%: 176,000.00

Land 20%: 44,000.00

• 80/20 Rule (Most accountants)
• Building: Depreciated over 27.5 years
• Land: Not depreciated
• Total: $7,273.
• The "Tax Smart Landlord" way
• Building - Tangible Personal Property: Depreciated over 5 years
• Building: Depreciated over 27.5 years
• Land Improvements: Depreciated over 15 years
• Land: Not Depreciated
• Total: $11,067.

Tip #2: Secure your deductions!

Always give 1099 for workers to secure your deductions. It will be very hard to find these workers around tax season, you don't want to scramble last second. (Get their insurance/W2 information as well)

Tip #3: Keep Good Records

Keep receipts for 3 years and tax returns for 7 years.

Use a system that works for you! Whether that is an excel file sheet or an online cloud based software. Whatever you choose, make sure it is consistent.

Just remember, if you put garbage in you get garbage out.

Have 1 master entity (LLC). Print PNL (Profit and Loss) for each house. You can have multiple LLC's for each house, just assign rights to the master to simplify things. 

Tip #4: Understand Repairs vs Improvements.

Repairs are similar items that are an immediate expense (1 year deduction)

Improvements are an entire replacement (superior material) Example: wood flooring depreciated over 27 years)

Tip #5: Hold onto your real estate leads.

Follow up every 3 months. The person might not be willing to sell their house now but when they are ready, who do you think they will call? Answer: The person who has followed up and been consistent with their "touches"

Tip #6: The best time to talk to your Accountant

When you BUY: As soon as you buy a property you should be taking pictures for reference. You may be able to deduct certain materials you're throwing out.

When you SELL: Take the best tax strategy for your goals.

When you RENOVATE: Choosing the right repairs and improvements to maximize your deductions. 

Right before end of year: Checking in with your CPA to make sure you have all you need.