I hope you’re doing well. With tax season around the corner, I wanted to share a quick checklist to help you navigate the complexities of managing taxes on your real estate investments and gather the necessary documents for a smooth filing process.
A Real Estate Tax Checklist
- Gather reports of all rental income and expenses: Ensure all income, including fees or deposits, is accurate. Provide records of deductible expenses such as mortgage interest, repairs, property management, and even travel costs related to managing your properties.
- Calculate capital gains and losses: If you’ve sold any properties, identify any capital gains or losses. Be aware of the difference in tax rates for short-term vs. long-term gains, which can impact your tax liability. I’m happy to help with this if needed.
- Apply depreciation for rental properties: Depreciating rental properties over their useful life can reduce taxable income, but keeping precise records is crucial to avoid issues with the IRS.
- Review passive activity losses: If rental expenses exceed income, you may have passive losses. These losses are subject to specific rules that limit how much can be deducted against other income.
- Maximize homeowner deductions: Remember that mortgage interest and property taxes are deductible for your primary residence, along with certain mortgage points.
- Organize your records for the year: Although it may be too late for this tax season, having a well-organized accounting of income, expenses, and any property transactions going forward will make the tax filing process smoother. Here are nine accounting software programs you may want to consider.
- Consult a tax professional: Real estate tax laws are complex and change frequently. A tax professional can help ensure you’re maximizing deductions and staying compliant.
As always, please don’t hesitate to reach out if you need legal guidance as tax day comes into view.
Best,
Sam Calvert
