How To Choose A Real Estate Tax Accountant

Are you tired of having a HUGE tax bill? Most professionals are and look into investing in real estate to help lower some of their tax burden. I started investing in real estate syndications several years ago and quickly realized that having a good real estate accountant on our team of advisory service professionals was a priority. 

You’re probably familiar with “accounting needs” and “bookkeeping services” in general but may not understand it when it comes to real estate.

Real estate tax accounting services is the process of putting together and filing tax returns for real estate professionals or businesses. It involves analyzing and managing tax obligations and specific needs related to real estate transactions, such as the sale or purchase of a property, rental income, and property tax assessments.

Keeping track of real estate tax is important for a number of reasons:

#1. Compliance: Tax laws on real estate can be hard to understand and are always changing. A real estate tax accountant can help a business or person in real estate make sure they are following all tax laws and rules.
#2. Tax planning: The right real estate accountant can help you find ways to plan your taxes, like taking advantage of tax deductions and credits, to lower your tax bill and increase your profits. This is especially important for those of us that are high-income professionals constantly faced with a LARGE tax bill.
#3. Financial management: A real estate CPA can tell real estate owners and investors a lot about their financial health, including where they might be able to save money.

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Roles Of a Real Estate Tax Accountant

A real estate tax accountant’s job is to help real estate investors with their taxes by giving them expert advice and help.

Some of the specific things they might have to do are:

• Preparing and filing tax returns. This includes preparing and submitting federal, state, and local tax returns for real estate businesses and individuals, as well as making sure that all required tax documents are collected and organized.
• Tax planning: A real estate accouting firm can help you find ways to plan your taxes, like taking advantage of tax deductions and credits, to lower your tax bill and increase your profits.
• Tax compliance: They can help make sure you’re following all tax laws and rules. This means keeping up with changes to tax laws and giving clients advice on how to follow the rules.
• Financial analysis: A real estate tax accountant can provide valuable insights into the financial health of a real estate business or individual, including identifying areas of potential cost savings.

To do their job well, a real estate tax accountant needs to know a lot about the tax code, tax law and rules that apply to the real estate industry. They also need to be able to look at financial data and find tax planning opportunities for financial sucess.

They should also be good at providing clients with a great level of service and communicating with people, since they will be working closely with clients and may have to talk to government agencies.

Common Real Estate Tax Issues 

A real estate CPA firm can help with many types of real estate tax issues, such as:

#1. Property tax assessments and appeals

Property tax assessments are used to figure out how much property tax is owed, so they can have a big effect on how much it costs to own a personal residence. If a property tax assessment is wrong, the property owner may have to pay more than they should.

A real estate CPA can help check the accuracy of property tax assessments and, if necessary, help with the appeals process. This could mean gathering and presenting evidence to support an appeal, like proof of the property’s value or sales in the area that are similar.

If an appeal is successful, the property tax assessment could go down, which would mean the property tax bill would go down, too. A real estate CPA can also give advice on how to lower future property tax bills, such as by applying for exemptions or credits that may be available.

#2. Depreciation and capital gains tax

When you sell a property, you may have to pay a capital gains tax. This is a tax on the profit made when an asset, like a house, is sold for more than it was worth.

A real estate tax accountant can help you figure out how much tax you have to pay when you sell a property and give you advice on how to increase your tax savings.

One of the best tax strategies is to take advantage of depreciation, which is a tax deduction (aka paper loss) that lets a property owner recover the cost of a property over time. When a property is sold, this can lower the amount of capital gains tax that needs to be paid.

A real estate investor may also be able to deduct the cost of any improvements made to the property and any real estate taxes paid on the property. A real estate certified public accountant can help you find these deductions and use them to lower your taxable income.

Related article: 5 Ways To Defer Capital Gains Tax When Selling Real Estate

#3. 1031 exchange

A 1031 exchange, which is also called a “like-kind exchange,” lets an investor sell a property and put off paying capital gains tax by using the money to buy another property that is the same kind. This can be a good way to sell a property and put the money from the sale into another investment, like other commercial real estate.

For a 1031 exchange to be possible, the properties being traded must be “like-kind.” This usually means that they must be used for the same thing, such as real estate for real estate. To finish the exchange, you must also follow strict rules and meet strict deadlines.

Timeline #1 – You have 45 days after you sell your property to identify up to 3 new properties. This can be done in writing but you have to purchase one or more of them.

Timeline #2 – You have 180 days to close on one or more of the three properties that were identified.

A real estate tax accountant can help you figure out how to follow the rules and requirements of a 1031 exchange and make sure you’re not breaking any tax laws. They can also tell you how the exchange will affect your taxes and help you make the tax documents you need.

#4. Tax breaks for rental property

Rental properties can bring in money and offer tax breaks, like being able to depreciate the property over time. Depreciation is a tax break that lets a property owner get back some of the money they spent on their investment property over time as previously discussed. 

Other things that rental property owners may be able to deduct from their taxes are the cost of any improvements they make to the property and any real estate taxes they pay on the property. A real estate CPA can help you find these deductions and use them to lower your tax liability.

In addition to these deductions, owners of rental properties may also be able to claim deductions for costs like:

• utilities
• repairs
• maintenance

To get these tax breaks, it’s important to keep detailed records of all the costs that come with renting out a property.

What To Look For in a Real Estate CPA

When looking for a real estate tax accountant, it’s important to think about the following:

1. Expertise in real estate tax law: Look for an accountant who knows a lot about the tax laws and tax regulations that apply to the real estate business. This means keeping up with changes to tax laws and knowing in depth how they affect real estate transactions.
2. Paying close attention to tax preparation details: A real estate tax accountant should pay close attention to details to make sure that tax returns are correct and that tax laws are followed. This means checking calculations twice and making sure that all tax documents are collected and in order.
3. Good communication skills: A real estate tax accountant should be able to explain tax ideas clearly and give clients advice on ways to save money on taxes. They should also be able to talk to clients and government agencies in a clear way.
4. Customer service: A real estate tax accountant should pay close attention to what their clients want and need. This means getting back to people quickly when they call or email and being available to answer questions or deal with concerns. Many use an online contact form to address immediate concerns.

How To Find a Good Real Estate CPA

To find a qualified and experienced real estate tax accountant, you can start by asking other real estate invstors. 

One of my favorite groups to work with can be found HERE.

You can also look in online directories or on websites that list professional accounting firms and contact several of them to ask about their experience and qualifications in real estate tax accounting.

When you contact them, make sure to ask about:

• the accountant’s education
• professional experience
• real estate tax law knowledge

You may also want to ask for references from the accountant’s past clients to find out how well he or she does their job and treats customers.

Think about meeting with more than one candidate to find the one who fits your needs best (I typically interview a minimum of three). This can be a good time to talk about your tax needs and ask any questions you might have.

It’s important to work with an accountant who knows and has experience with real estate tax law and with whom you feel comfortable.

Summary

Real estate tax accounting is an important part of managing the tax obligations of a real estate business or an individual. A real estate CPA can give expert tax advice and help with things like preparing and filing tax returns, finding opportunities for tax planning, and making sure that tax laws are followed.

An important part of their job is to help make smart financial decisions so you can make as much money as possible. By working with a qualified one, you can make sure you are following tax laws and take advantage of tax planning opportunities to lower your tax bill.

Overall, it is highly recommended to get help from a qualified real estate tax accountant to make sure you are following the rules and getting the most out of your tax benefits. Doing so can help make sure that your real estate business or other ventures make money.

Looking For a Good Real Estate CPA?

Check out my recommendation HERE.

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