REIT, 1031 exchange, Section 121 exclusion, 1099s, and ROI. All of the tax jargon can get overwhelming, especially when it comes to real estate taxes. If your only income comes from a W-2 from employment, then your taxes are a breeze but add real estate investments to the mix, and you have a lot more things to cover.
Luckily, we’re real estate CPAs and we’re here to help.
1031 Tax-Deferred Exchanges
A 1031 exchange allows you to sell a property and put that money towards the purchase of another property without recognizing a taxable gain. The IRS outlines this ruling in IRC Section 1031 (a)(1) as follows:
“No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like-kind which is to be held either for productive use in a trade or business or for investment.”
By deferring capital gain taxes with a 1031 exchange, you can effectively build a real estate portfolio and have a better return on investment (ROI).
Accounting for Investment Properties
Another important thing to do when you have an investment property or properties is to keep a good account of all your expenses and financial statements. There are many things you can deduct when it comes to the work you do on your property. You also have to account for the basis and improvements to your home.
If you’re a real estate investor and have multiple properties, you need to be extra vigilant in reporting on your tax return. The IRS is particularly attentive when it comes to taxpayers with substantial real estate.
It helps to have someone organize your finances for you while tax planning.
1099s are forms to report earnings that aren’t from your employment. In some cases, you’ll have to report a 1099-S with your tax return to report money made from the sale of property or other real estate-related investment and transactions. In many cases, you should also be issuing 1099s to those service providers working on your rental properties.
There are different types of 1099s and having a trained and experienced real estate CPA by your side to help you navigate tax reporting makes a difference.
C&D | Real Estate CPAs Advising Your Investments
Here at C&D, we understand real estate professionals and know how to help. We will help you uncover the smartest tax strategies to ensure you report your real estate investments correctly. We are also well versed in the new tax laws under the Tax Cuts and Job Act (TCJA). Let us help you minimize taxes, capitalize on opportunities, secure financing, diversify, and effectively manage your cash flow and growth.
Give us a call to talk about our real estate services and schedule a consultation. You should be successful in your real estate endeavors.