Real Estate Professionals
Whether you are a commercial or residential agent, flipping properties or renting rooms in your primary residence, we have expertise and resources to navigate the financial side of your business. Scroll down for issues to consider:
Tax Deductions for Real Estate Professionals
Beyond the obvious deductions, like office expenses and utilities,there are many tax deductions you may not have thought of.
Advertising including Web Design, Hosting and Domain Fees, Leads/Mailing Lists, Networking Event Costs
Equipment including Camera, Lock Boxes/Locksmiths/Keys, Staging Items
Selling Expenses including Appraisal/Finder/Referral/Inspection Fees,
Staging Fees, Open House Expenses, Photo Editing
For a more complete list of potential deductions, click here.
What is a "Real Estate Professional"?
If you own rental real estate, you may be able to be classified as a Real Estate Professional for tax purposes. The designation allows you to deduct losses the activity generates or avoid the net investment income tax if income is generated. In order to take advantage of the tax benefits Real Estate Professionals are provided, you must meet these three standards:
1/ At least 50% of your time is spent in real estate activites vs. non-real estate activities
2/ You must perform more than 750 hours in real estate activities and
3/ You must materially participate in each rental activity.
Activities such as travel, on-call time, studying for the real estate exam, and research do not count toward the 50% or 750-hour tests.
Documenting your level of participation in your rental activity is critical. Simon Kelvington CPAs will help you navigate the requirements.
Cost Segregation: A Powerful Tax Deferral Tool
Cost segregation is a tax deferral strategy that identifies assets within a building that can be depreciated over a shorter period than the 39 or 27.5-year standard methods. If you have constructed, purchased, or renovated a facility, then valuable tax-saving opportunities exist. Our tax expertise combined with outside engineering and construction expertise can allow you to maximize tax deductions for prior and current real estate investments.
By accelerating your tax depreciation, you save taxes on your investments.
1031 Exchanges for Tax Savings
Whenever you sell business or investment property and have a gain, you generally have to pay tax on the gain at the time of sale. Internal Revenue Code Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange.
Both properties must be held for use in a trade or business or for investment.
Property used primarily for personal use, like a primary residence or a second home or vacation home, does not qualify for like-kind exchange treatment.
Properties are of like-kind if they’re of the same nature or character, even if they differ in grade or quality. Real properties generally are of like-kind, regardless of whether they’re improved or unimproved. For example, an apartment building would generally be like-kind to another apartment building. However, real property in the United States is not like-kind to real property outside the United States.
Our tax professionals will provide guidance if you are planning a 1031 Exchange and take care of reporting requirements on subsequent tax filings.