Starting a real estate business can be a great way to build wealth and generate income. However, it’s important to understand the tax implications of owning and operating real estate. There are several tax benefits that real estate investors can take advantage of, but the rules can be complex. A qualified Certified Public Accountant (CPA) can help you navigate the tax code and maximize your savings. Learn about the tax benefits of starting a real estate business and how a CPA can develop a tax plan that meets your specific needs and goals.
Real Estate Business Tax Benefits
- Depreciation deductions: Real estate investors can depreciate the value of their properties over time, which reduces their taxable income. Depreciation is the accounting concept of allocating the cost of an asset over its useful life. For real estate, the useful life is generally 27.5 years. Therefore, investors can deduct 3.63% of the cost of their property from their taxable income each year.
- Pass-through deductions: If you own your real estate business through a pass-through entity, such as an LLC or S corporation, you can deduct certain qualified business income (QBI) from your personal taxes. This deduction can be a significant tax benefit, especially for high-income earners.
- 1031 exchanges: 1031 exchanges allow investors to defer capital gains taxes when they sell one investment property and purchase another. This deferment can be a great way to reinvest your profits and grow your portfolio.
- Other deductions: Real estate investors can also deduct various other expenses, such as property taxes, mortgage interest, and repairs and maintenance costs.
How a CPA Can Help Real Estate Investors
A CPA can help you take advantage of all the tax benefits available to real estate investors. They can also help you develop a tax plan that minimizes your tax liability and maximizes your profits.
Here are some of the ways a CPA can help real estate investors:
- Choose the right business entity: The business entity you choose can significantly impact your taxes. A CPA can help you select the correct entity for your needs and goals.
- Track your expenses: It’s essential to track all of your business expenses so that you can deduct them from your taxable income. A CPA can help you set up a system for tracking your expenses and ensure you’re deducting all eligible expenses.
- File your taxes correctly: Real estate taxes can be complex, so it’s vital to file them correctly. A CPA can help you prepare and file your taxes accurately and on time.
- Represent you in an audit: If the IRS schedules an audit, a CPA can represent you and help you resolve any issues with the IRS.
In conclusion, a CPA can be a valuable asset to any real estate investor. They can help you maximize your tax savings and minimize your tax liability. If you’re starting a real estate business or already an experienced investor, consult with a CPA, like the experts at FSL Tax and Accounting Services, to learn more about the tax benefits available to you.
Expertise You Can Trust
Every real estate business needs a comprehensive tax strategy that maximizes profits while minimizing tax liabilities. At FSL Tax and Accounting Services, we have years of experience working with real estate agencies. Our expertise allows us to provide the personalized services that real estate investors/agents need to improve their financial efficiency. We will ensure you correctly calculate your taxes and take all potential tax breaks while maximizing profits.
To learn about the tax benefits of starting a real estate business, call 678-702-7218 for a free consultation or complete the online form. Investing in a CPA ensures you meet all of your tax obligations.