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EXCLUSIVE TAX STRATEGY CHECKLIST FOR

REAL ESTATE INVESTORS

  • PROPERTY ACQUISITION
  • RENTAL PROPERTY OPERATIONS
  • DEPRECIATION STRATEGIES
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EXCLUSIVE TAX STRATEGY CHECKLIST FOR REAL ESTATE INVESTORS

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STEP: 1

PROPERTY ACQUISITION:

ENSURE ALL SETTLEMENT FEES AND CLOSING COSTS ARE RECORDED.
SEPARATE LAND COST FROM BUILDING COST FOR DEPRECIATION.

STEP: 2

RENTAL PROPERTY OPERATIONS:

KEEP DETAILED RECORDS OF RENTAL INCOME RECEIVED. DOCUMENT ALL OPERATING EXPENSES: PROPERTY MANAGEMENT FEES, MAINTENANCE, UTILITIES, ADVERTISING, ETC. TRACK TRAVEL EXPENSES RELATED TO PROPERTY MANAGEMENT.
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STEP: 3

DEPRECIATION STRATEGIES:

USE MACRS TO DEPRECIATE RESIDENTIAL PROPERTY OVER 27.5 YEARS AND COMMERCIAL PROPERTY OVER 39 YEARS.
CONSIDER A COST SEGREGATION STUDY TO ACCELERATE DEPRECIATION.

STEP: 4

INTEREST DEDUCTION:

DEDUCT MORTGAGE INTEREST ON LOANS USED TO ACQUIRE OR IMPROVE RENTAL PROPERTY.
KEEP PERSONAL AND INVESTMENT-RELATED DEBT SEPARATE.
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STEP: 5

TAXES AND INSURANCE:

KEEP DETAILED RECORDS OF RENTAL INCOME RECEIVED. DOCUMENT ALL OPERATING EXPENSES: PROPERTY MANAGEMENT FEES, MAINTENANCE, UTILITIES, ADVERTISING, ETC. TRACK TRAVEL EXPENSES RELATED TO PROPERTY MANAGEMENT.

STEP: 6

Repairs vs. Improvements:

  • Classify expenses correctly: repairs (deductible) vs. improvements (depreciable).
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STEP: 7

Passive Activity Losses:

  • Understand passive activity loss rules and how they may limit deductions.

STEP: 8

Home Office Deduction:

If applicable, use the home office deduction for managing rental properties.
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STEP: 9

Legal Entity Structuring:

  • Consult with a tax professional about the best legal structure for your investments for tax purposes.

STEP: 10

1031 Exchanges:

  • Keep records of any 1031 exchanges to defer capital gains taxes.
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STEP: 11

Rental Property Sale:

  • Track basis and improvements to calculate accurate capital gains or losses.
  • Collect and report all 1099-S proceeds from real estate transactions.
STEP: 12

Tax Credits:

Investigate potential tax credits for which you may be eligible, such as energy efficiency or historical preservation.
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STEP: 13

Documentation and Receipts:

  • Maintain organized records and receipts for all deductions claimed.
STEP: 14

Quarterly Estimated Taxes:

  • Calculate and pay quarterly estimated taxes if applicable to avoid penalties.
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STEP: 15

Year-End Strategies:

  • Review year-end strategies to defer income or accelerate deductions as appropriate.
STEP: 16

Professional Consultation:

  • Schedule an annual review with a tax professional specializing in real estate.
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