How did you manage taxes when you started out?

5 Replies

I try to be frugal and dedicated.

I read books on the tax benefits of real estate. 

I then filed my first year with TurboTax and was all of a sudden surprised. A lot of tax deductions didn't apply to me due to my income level. TurboTax though wouldn't explain the ins and outs but I started to find articles that explained some trade-offs online. 

This year I hired a CPA. He looked at my prior year return and even found mistakes from TurboTax. It cost some money to hire a CPA but I now think this is the best solution on the market for tax planning and filing with real estate. 

I still wish though that there was more intelligent software available that provided tax planning for real estate and filed taxes more easily than TurboTax. 

Any suggestions? How do you manage your tax planning and filing for rental properties? 

I had my accountant, lawyer, real estate agent lined up prior to beginning my first investment purchase. An accountant is a essential part of your team and considered a standard business tool. The savings in your time and tax dollars potentially saved will pay for their fees.

Turbo Tax is fine for basic tax filings (w2 income, standard deductions, etc). However, in my opinion once you start investing in real estate and your taxes get more complicated, it really pays to have a tax professional on your team. 

I personally prefer an actual human over a software program. Ever since I’ve been involved in real estate investing, I have used a tax attorney to prepare my taxes. He not only prepares my taxes, but also helps with tax planning and tax advice throughout the year. As an added benefit, since he’s an attorney certified in taxation law and also experienced in tax litigation, he can represent me in audits and - if necessary - all the way up to federal court. I may not (hopefully) ever have a need for that, but I like the peace of mind that comes with knowing that he can. A software program can’t do any of that. 

My theory is, for rental property owners, pay the money for an experienced CPA (and by experienced, I mean very real estate investing savvy...not just a generally experienced CPA).

One of the greatest financial benefits of rental properties is in the taxes. And the laws are constantly changing...some for better or for worse. Only a real-life person will be able to keep up with those. Even if you get software this year that maximizes your returns, it may not next year. But in my experience, the software won't do it, period.

Originally posted by @Ali Javid :

I try to be frugal and dedicated.

I read books on the tax benefits of real estate. 

I then filed my first year with TurboTax and was all of a sudden surprised. A lot of tax deductions didn't apply to me due to my income level. TurboTax though wouldn't explain the ins and outs but I started to find articles that explained some trade-offs online. 

This year I hired a CPA. He looked at my prior year return and even found mistakes from TurboTax. It cost some money to hire a CPA but I now think this is the best solution on the market for tax planning and filing with real estate. 

I still wish though that there was more intelligent software available that provided tax planning for real estate and filed taxes more easily than TurboTax. 

Any suggestions? How do you manage your tax planning and filing for rental properties? 

 I hired an accountant.

@Ali Javid

I used turbo tax deluxe edition, and worked out just fine. For real estate, it is the schedule E (rents and royalties). Input income and expenses. Some expenses are capital expenditures and rules apply differently, depreciation was big deduction, but just make sure deduct building and not land. Will have to recapture depreciation when sell. Mileage was big expense, as long as you have good record keeping. 

Overall, turbo tax did the job. Note, all CPA's, given the same tax information, will probably have different bottom line outcomes. 

Terry

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