Question 1

What year-end tax planning strategies apply to real estate investors?

Accepted Answer

RE investor strategies: harvest losses (sell underperforming properties before December 31 to: realize capital losses that offset capital gains from other sales), maximize depreciation (place new assets in service before year-end to: begin depreciation deductions; consider cost segregation for accelerated depreciation), 1031 exchanges (plan exchanges to: complete within the calendar year or bridge into the next year for strategic deferral), opportunity zone investments (invest capital gains into Qualified Opportunity Zone funds before December 31 to: defer and potentially reduce capital gains taxes), and entity structuring (review: entity structure and ownership to optimize: pass-through deductions and liability protection).

Question 2

How do capital gains affect year-end real estate tax planning?

Accepted Answer

Capital gains: short-term (properties held less than 1 year: taxed at ordinary income rates: up to 37% federal), long-term (properties held more than 1 year: taxed at preferential rates: 0%, 15%, or 20% depending on income), net investment income tax (3.8% NIIT on: net investment income for taxpayers with modified AGI above $200,000 single or $250,000 married), and depreciation recapture (Section 1250: gain attributable to depreciation is: recaptured at 25%). Year-end strategy: if selling multiple properties: time sales to: balance gains and losses within the same tax year; consider: installment sales to spread gains over multiple years.

Question 3

What documentation should real estate investors prepare for year-end?

Accepted Answer

Documentation: income and expenses (compile: all rental income received and operating expenses paid during the year), capital expenditures (document: all improvements and capital additions with receipts and invoices), depreciation schedules (update: depreciation schedules for all properties, including any new assets placed in service), closing statements (retain: settlement statements for all properties bought or sold during the year), 1099 forms (prepare and distribute: 1099 forms for: independent contractors paid $600+ during the year), and entity records (update: operating agreements, meeting minutes, and financial statements for all RE entities). Organize: before providing records to the CPA for tax preparation.

Year-End Tax Planning

Year-End Tax Planning: Real Estate

Strategies

Capital Gains

Documentation

Related Terms

Barnes Walker Tax Planning

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