Successfully investing in real estate requires knowledge of local market trends, building conditions and improvements, commercial financing options, return on investment calculations, and more. Tax laws and regulations also have a significant impact on how successful real estate investment is, but most investors don’t have expertise in this particular area. That’s why it’s crucial to invest in a real estate CPA firm.
Impact of Tax Liabilities and Deductions
Real estate tax laws and regulations are more complex than some other areas of tax regulations. For example, real estate investors may be affected by:
- Property depreciation options
- Available deductions and credits
- Tax liabilities from the sale of a property
Failing to properly report and pay the liabilities due can result in stiff penalties and interest, while not taking advantage of allowed deductions and mitigation strategies yields much lower returns. A CPA specializing in real estate tax law will be able to minimize liabilities while making sure what can’t be avoided is properly reported and paid.
Complexity of Federal, State, and Local Tax Regulations
Tax laws and regulations only become more complex if properties are held in multiple jurisdictions. In addition to federal laws, which all real estate investors in the U.S. must follow, state and even local municipal regulations must be taken into account. Each state and many cities have their own sets of specific and detailed rules.
A real estate CPA will be familiar with the nuances of state and local laws and will know how to research any new jurisdictions where a property is being purchased.
Changing Landscape of Tax Regulations
Tax laws regularly change, especially when federal, state, and local regulations are all considered. New legislation, executive actions, and specialized programs, not to mention updated IRS guidance, can all impact tax reporting. Sometimes the changes come very late in the year, close to when taxes are due.
Keeping up with all of the changes that can be made is nearly impossible for real estate investors. There’s simply not enough time to evaluate and manage properties, while also staying current on all of the potential changes. A knowledgeable real estate CPA will monitor any new changes in relevant tax codes, and know how to quickly adapt to important ones.
Maximizing Deductions
As mentioned, maximizing returns means maximizing deductions and credits.
This includes everything from standard business deductions, such as a commercial vehicle, office space (including home office), mileage, and supplies, to real estate-specific deductions. Real estate deductions could be depreciation and improvements, specialized credits, and many other items.
A real estate CPA can make sure all qualifying deductions and credits are claimed, minimizing taxes due as much as possible.
Strategic Planning and Long-Term Vision
Investing in real estate isn’t just about the here and now, it also requires long-term planning for ongoing success. Whether planning to expand a portfolio, sell properties, or transition into a different type of real estate investment, every decision requires thinking through the long-term tax implications.
A real estate CPA can help strategize. They can ensure that decisions aren’t just good for the present but also optimized for future tax implications.
Work With an Experienced Real Estate CPA
Make sure you’re working with a CPA who understands real estate investment tax law. To speak with a real estate CPA who can help you in all manner of real estate investment, contact us at Gurian CPA Firm.
