Tax Tips For Real Estate Investors To Bank On


Have you ever found yourself trying to identify the best tax tips for real estate investors? Are you stuck wondering whether or not you are prepared for the upcoming tax deadline? Don’t worry, you are not alone: there’s a large contingent of investors thinking the same thing you are.

Whether you want to believe or not, tax time should be an investor’s best friend. Provided you take the appropriate precautions, follow the right systems, and mind due diligence, there is no reason you shouldn’t look forward to the day the majority of American’s are less than excited about. It’s worth noting, however, that tax time won’t go out of its way to help you. In fact, it can really hurt you if you aren’t prepared. That’s why you need to place the odds in your favor. Fortunately, there are some tax tips for real estate investors to make the process a lot more enjoyable, and perhaps a little more lucrative.

4 Tax Tips For Real Estate Investors

Tax season

1. Seek out a knowledgable CPA

Tax season for real estate investors has become synonymous with the greatest times of the year, and for good reason. Provided you mind due diligence, there is no reason April 18 can’t act as a tax shelter for your hard-earned income. If for nothing else, taxes are the single most important vehicle wealth building investors can take advantage of. It’s worth noting, however, that the benefits awarded to real estate investors are rendered moot in the face of negligence. Those that aren’t aware of what to deduct or what benefits they are legally entitled to may as well be throwing money away. That said, nothing is more important come tax time than enlisting the services of a trained professional; preferably someone with knowledge pertaining to your field of expertise.

I maintain that one of the most advantageous moves an investor can make this time of the year is to align themselves with a knowledgable certified public accountant (CPA). It’s not enough to simply hire the first CPA you come across, however. Be sure to vet those you intend to work with, and it doesn’t hurt to find someone with experience in your line of work. I would even recommend trying to find a CPA that has investing experience, as they are more likely to be of assistance.

2. Track your expenses throughout the year

Tax season for real estate investors, while polarizing for the majority of U.S. citizens, is a wealth building vehicle for real estate investors that take the appropriate steps. And, as it turns out, one of the most important steps is to simply mind due diligence. While it may sound trite, few things are more important to the average real estate investor than tracking their business expenses throughout the year. That means keeping tabs on all of the money you spend, where you are spending it, and what it’s being used for. The more you know about where your money is being spent, the better; you would be wise to remember that.

Over the course of a year, the average real estate investor will incur more expenses than they care to remember. That said, it’s in your best interest to track your expenses and save receipts. If for nothing else, the IRS will only care about what you can prove. Don’t give them any reason to doubt your next filing; save your receipts and come to the table prepared.

3. Prioritize organization

It’s not enough to simply save the receipts you accumulate over the course of a year; you have to proceed to organize them. What good will all of those receipts be to you if they aren’t organized or, worse, can’t be found?

I highly recommend organizing everything you will need come tax time in a way that works best for you. Whether that means organizing a filing system in an accordion folder or digitizing all of your expenses in Quickbooks, find a system and stick with it.

Not only will organizing everything in such a way make it a lot easier to sift through when the time comes, but it will also allow your CPA to do what they do best: find you ways to save money. If everything is organized in Quickbooks, for example, your CPA should have no problem identifying everything and maximizing your tax return

4. Own Rental Property

It’s no secret: owning and operating a successful rental portfolio is one of the most promising exit strategies an investor can partake in. Not only does a sound buy and hold strategy award savvy investor with a way to simultaneously pay down their mortgage and make more than a few bucks on the side, but it allows them to do so passively. In aligning your portfolio with the right property management company, there is no reason to believe you couldn’t collect rent checks by investing an almost negligible amount of time and energy into the property itself.

It’s worth noting, however, that the benefits of owning rental property aren’t solely relegated to passive income. No, the perks of rental property ownership transcend into the tax arena. All things considered, rental properties offer owners some of today’s greatest tax benefits; benefits that can certainly impact your bottomline for the better.

The tax benefits of owning an income-producing rental property include, but are not limited to the following:

  • Recover the cost of income-producing property through depreciation
  • Borrow against real estate equity to make additional investments
  • Write off a variety off rental expenses that range from advertising to repairs

For a more comprehensive list of the expenses you are allowed to write off, consult the IRS website for more information.

Tax tips for real estate investors can range from the obscure to the obvious, but there are a select few that can really take this time of the year to the next level. If you are able to carry out the four ideas I outlined above, I strongly believe you will find April 18th to be a lot less stressful, and perhaps a lot more enjoyable.