Real estate can build wealth—if your tax strategy keeps up. Below are the most common mistakes we see with investors and landlords, plus how to avoid them. For hands-on help, see our Tax Preparation Services.
1) Commingling Personal and Property Finances
Use separate bank/credit accounts per entity and property when practical. Need setup help? Our Business Consulting can structure entities and workflows correctly.
2) Misclassifying Property Type or Activity
Short-term rentals, long-term rentals, and flips have different rules (material participation, SE tax, QBI). We’ll review facts and apply the right treatment through Business Tax Preparation.
3) Missing Legitimate Deductions
Interest, taxes, insurance, repairs vs. improvements, travel (substantiated), professional fees, and home office (if eligible). Ensure documentation with Monthly Bookkeeping.
4) Ignoring Depreciation & Cost Segregation
Depreciation reduces taxable income; cost seg can accelerate it on qualifying components. We’ll model options via Outsourced CFO & Controller Services.
5) Weak Recordkeeping & Receipt Management
Digitize receipts and connect bank feeds to keep audit-ready books. If you receive a notice, our IRS Representation team can respond and resolve.
6) Overlooking State & Local Tax (SALT) Exposure
Multi-state ownership can trigger filing requirements and different depreciation rules. Get an SALT review through Consulting.
7) Poor Entity Choice & Basis Tracking
LLC, partnership, S corp—each impacts liability, basis, QBI, and exit strategy. We’ll align choice of entity and basis records with your long-term plan via Business Consulting.
8) Missing Estimated Taxes & Deadlines
Underpayments lead to penalties and cash-flow surprises. Our Personal Tax and Business Tax teams plan quarterly estimates and year-end strategy.
Frequently Asked Questions (FAQs)
Can I deduct repairs the same year and capitalize improvements?
Yes. Ordinary repairs are deductible; improvements are capitalized and depreciated. We help categorize correctly.
How does cost segregation help real estate investors?
It identifies shorter-life assets to accelerate depreciation, often producing larger deductions in early years.
Do short-term rentals follow different tax rules?
Often yes—especially for material participation and potential self-employment tax exposure. Proper classification is key.
Need Smarter Tax Planning in 2025?
Henriquez Accounting & Tax Services helps individuals and businesses with proactive planning, payroll, sales tax, and IRS representation.
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