Do I need a Real Estate Tax Accountant?

Atlanta, Georgia
Tax, SDIRAs & Cost Segregation
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Do I need a Real Estate Tax Accountant?

Chris Shon
Member since 2023 · 17 posts · 9 votes

Hello BP community!

We started an LLC last year and are about to file our first return for 2024. We have purchased a property for flip that's currently under renovation. I wanted some advice on whether we need a specialized tax accountant for Real Estate. They seem to be very expensive and I'm not sure if it's something absolutely necessary or not.

It's a GA LLC, but we're based out of CA.


Any direction would be much appreciated!

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Natalie KolodijBusiness Member
Moderator
Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
1y

I have a few questions- 

"We started an LLC" "We purchased a property"

Who are the legal owners of the LLC? 

Does the LLC legally own the property that was purchased? 

And @Michael Plaks is correct that setting up in GA didn't avoid the CA LLC fee. 

You are now a foreign entity doing business in CA since YOU run the business from there so Cali wants their $800 either way.

So whether you need a REI tax pro is all open to interpretation. Is this 1 flip where you're going to lose $20,000 and never touch real estate again? Then no.

First flip with good margins and intending to do more in the realm of real estate? Find someone now. 

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  • Ben TrageserPro Member
    Accountant · Montclair, NJ · Member since 2020 · 218 posts · 104 votes
    1y

    I'm a little biased but I think having an accountant that specializes in real estate and speak your language can always be helpful. We have clients that have come to us from other providers and been able to provide them with strategies to help mitigate their exposure. It also depends on the complexity of your flip and how your bookkeeping has been for expenses.

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    0Reply
  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    1y

    Here is an example of what it costs you to avoid professional advice. Your LLC saves you absolutely nothing on taxes, unless you will end up making a killing on this deal or have other juicy deals - and that is a big IF.

    But what you did accomplish is that now you owe $800 per year to your greedy state of CA, even though the LLC is formed in another state. I would have advised you against an LLC, most likely, contingent on your attorney's legal protection concerns.

    This is assuming that by "we" you meant your spouse. If you partnered with someone other than your spouse then yes, LLC was a good idea, since you now have a partnership. Which is very complex and costly and likely warrants professional help.

    Now, if it's just you and your spouse, then your 2024 tax preparation is likely relatively straightforward:
    - you will create a Schedule C on your personal tax return
    - you will NOT report any costs of purchasing the property or its rehab, not in 2024
    - you will report your business overhead expenses such as marketing, driving, technology etc
    - you will end up with a business schedule showing zero income and some expenses - not breaking the rules but potentially raising an audit flag

    Can you do it yourself? Probably. Can a professional accountant do it better? Probably. Is it worth it? Hard to say. Please read this:
    https://www.biggerpockets.com/forums/51/topics/1088325-expla...

    1Reply
  • Kevin Gonzalez
    Accountant · Palm Springs, CA · Member since 2024 · 8 posts · 8 votes
    1y

    In all honesty if it's just one flip property I don't know if the $1,000 - $2,000 premium to have someone that markets themselves as a real estate CPA would yield you a good ROI in tax savings or some magical compliance maneuver. At this stage you're probably better off investing that extra money into your primary business activity.

    What part of CA are you in? I'm happy to answer any questions you might have if it's your first time trying to work with a CPA.

    0Reply
  • Chris Shon
    OP
    Member since 2023 · 17 posts · 9 votes
    1y
    Quote from @Michael Plaks:

    Here is an example of what it costs you to avoid professional advice. Your LLC saves you absolutely nothing on taxes, unless you will end up making a killing on this deal or have other juicy deals - and that is a big IF.

    But what you did accomplish is that now you owe $800 per year to your greedy state of CA, even though the LLC is formed in another state. I would have advised you against an LLC, most likely, contingent on your attorney's legal protection concerns.

    This is assuming that by "we" you meant your spouse. If you partnered with someone other than your spouse then yes, LLC was a good idea, since you now have a partnership. Which is very complex and costly and likely warrants professional help.

    Now, if it's just you and your spouse, then your 2024 tax preparation is likely relatively straightforward:
    - you will create a Schedule C on your personal tax return
    - you will NOT report any costs of purchasing the property or its rehab, not in 2024
    - you will report your business overhead expenses such as marketing, driving, technology etc
    - you will end up with a business schedule showing zero income and some expenses - not breaking the rules but potentially raising an audit flag

    Can you do it yourself? Probably. Can a professional accountant do it better? Probably. Is it worth it? Hard to say. Please read this:
    https://www.biggerpockets.com/forums/51/topics/1088325-expla...

    Thanks for the detailed response! Wanted to clarify a few things if that helps. 
    1. I don't think we owe $800 in CA, we incorporated in GA and have a registered agent in GA. 
    2. The LLC is a partnership between myself and another friend who's also an investor. Not my spouse. 

    Anything else that might be worth mentioning based on this?
    1Reply
    • Allan C.
      Rental Property Investor · Member since 2018 · 826 posts · 810 votes
      1y

      @Chris Shon Michael is right in that your GA LLC should be registered as a foreign entity in CA, thus encumbering you to the CA FTB fee. If one of the LLC members lived in another state and that person acted as managing member then you can avoid the FTB fee, but looks like you both reside in CA.

      0Reply
  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    1y
    Quote from @Chris Shon:
    Thanks for the detailed response! Wanted to clarify a few things if that helps. 
    1. I don't think we owe $800 in CA, we incorporated in GA and have a registered agent in GA. 
    2. The LLC is a partnership between myself and another friend who's also an investor. Not my spouse. 

    You ARE subject to CA LLC tax just by the fact of YOU being a CA resident, sorry. Does not matter to them where your LLC is registered.

    But, if it's a partnership with another investor, you probably needed it anyway. And you now have to file three tax returns:
    - partnership tax return
    - your individual tax return reporting 1/2 of the partnership losses
    - your partner's individual tax return reporting their 1/2 of the partnership losses

    And while partnership return can be DIY-ed, it probably should not be. Review Form 1065 yourself and decide whether you want to tackle it.

    The real dilemma here is that hiring a tax pro will definitely cost you, while it is unlikely to save you much (if anything).

    2Reply
  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    1y

    You don’t need them or anyone.

    Now do you want to scale?  

    If so you need them now and not later.  Tax accountant, banker, realtors, property manager, insurance agent, etc.  Start building a relationship.  

    With these relationships they will steer you to other deals, investors, and also warn you.  

    If you’re just going to do one or two flips a year keep your costs low.  

    1Reply
  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    1y

    I have a few questions- 

    "We started an LLC" "We purchased a property"

    Who are the legal owners of the LLC? 

    Does the LLC legally own the property that was purchased? 

    And @Michael Plaks is correct that setting up in GA didn't avoid the CA LLC fee. 

    You are now a foreign entity doing business in CA since YOU run the business from there so Cali wants their $800 either way.

    So whether you need a REI tax pro is all open to interpretation. Is this 1 flip where you're going to lose $20,000 and never touch real estate again? Then no.

    First flip with good margins and intending to do more in the realm of real estate? Find someone now. 

    Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies
    Kolodij Tax & Consulting
    WebsiteView Page
    3Reply
  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    1y

    I filled my own taxes for multiple years for multiple LLCs in multiple states. I am unaware of any law in any state that requires you to have a CPA. I no longer do my own taxes and hire a CPA. They save me some time and give me a little added protection but that's about it.

    [email protected]239-339-3969
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    0Reply
  • Sean GrahamBusiness Member
    Investor , CPA · Detroit, MI · Member since 2016 · 583 posts · 248 votes
    1y
    Quote from @Chris Shon:

    Hello BP community!

    We started an LLC last year and are about to file our first return for 2024. We have purchased a property for flip that's currently under renovation. I wanted some advice on whether we need a specialized tax accountant for Real Estate. They seem to be very expensive and I'm not sure if it's something absolutely necessary or not.

    It's a GA LLC, but we're based out of CA.


    Any direction would be much appreciated!

    The simple answer is yes. 

    Think of it as s long term investment that will save you headaches down the road. 

    Don't forget cost segregation studies as well. 

    Maven Cost Segregation Tax Advisors554 Reviews
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    0Reply
  • Mark Faulkner
    Real Estate Consultant · Roswell, GA · Member since 2023 · 50 posts · 26 votes
    1y

    I've used a CPA for several years for my investment properties here in GA. I find my time is more valuable than doing taxes for a few days. I also side with Adam and take advantage of the added protection of the firm I use. Good luck on the flip! Also,  let me know if you need a realtor here in GA. I've got a good amount of contractors I use for our long term buy & holds with heavy reno's up front. 

    0Reply
  • Account Closed
    Member since 2025 · 14 posts · 3 votes
    1y

    Since you've started an LLC, purchased a property to flip, and are filing your first tax return for 2024, working with a specialized tax accountant for real estate could be highly beneficial, even if they seem more expensive. Real estate transactions, especially flips, come with specific tax implications such as the potential for dealer classification, short-term capital gains, and cost allocation for renovations, which can significantly impact your tax liability. Additionally, given that your LLC is based in Georgia but you reside in California, you may face multi-state tax filing requirements, making compliance more complex. A real estate tax pro can help optimize deductions, ensure compliance, and avoid costly mistakes most importantly so that would be the next step

    0Reply
  • Mohamed YoussefBusiness Member
    Accountant · Brea, CA · Member since 2018 · 115 posts · 62 votes
    1y

    If it is only one flip for now, I suggest you find a CPA just to advise you on State filing requirements, ensure you are claiming all write-offs and issuing 1099s, etc. The CPA does not have to be specialized in RE if it's only one property.

    [email protected]714-684-6840
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    0Reply
  • Bill HamptonBusiness Member
    Accredited Investment Fiduciary, AIF®, Financial Planner, Tax Strategist, Real Estate Investor · Atlanta, GA · Member since 2012 · 2k+ posts · 977 votes
    1y

    @Chris Shon

    Yes, a real estate accountant is worth what you pay them. They will save you time and money. 

    Bigger Pockets is a great place to find a real estate tax accountant.

    A good real estate accountant can save you thousands of dollars by leveraging entity selection and formation, tax deductions, cost segregations, bonus depreciation and tax planning.

    I recommend finding an accountant who specializes in real estate taxation, business taxation, financial planning and tax planning.

    You may want to consider working with your accountant remotely to expand your options.

    I would also recommend looking for a accountant willing to work with you throughout the year. You want an accountant who can help you strategize and who is responsive when you want to know the consequences of the financial decisions you are making throughout the year.

    Good luck.

    404-482-3170
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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    1y

    @Chris Shon Hiring a real estate-focused tax accountant can be highly beneficial, especially if you're new to navigating the complexities of real estate investments and LLC filings. While their services may seem expensive, they can save you money by maximizing deductions and ensuring compliance with tax laws. For your GA LLC, filing correctly is crucial since you're based in CA and may need to handle multi-state tax filings.

    A real estate tax accountant can guide you on deducting renovation costs (likely capitalized rather than expensed for a flip), managing depreciation for investment properties, and tracking expenses related to your flip. If your project incurs losses, they can help determine if those losses offset your other income or if they are carried forward. They'll also ensure you comply with CA's LLC franchise tax rules and any reporting obligations for your flip. While not mandatory, a specialized accountant can reduce errors and provide significant tax-saving strategies tailored to your situation.


    This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

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    0Reply
  • Sean O'KeefePro Member
    CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 871 votes
    1y
    Quote from @Michael Plaks:
    Quote from @Chris Shon:
    Thanks for the detailed response! Wanted to clarify a few things if that helps. 
    1. I don't think we owe $800 in CA, we incorporated in GA and have a registered agent in GA. 
    2. The LLC is a partnership between myself and another friend who's also an investor. Not my spouse. 

    You ARE subject to CA LLC tax just by the fact of YOU being a CA resident, sorry. Does not matter to them where your LLC is registered.

    But, if it's a partnership with another investor, you probably needed it anyway. And you now have to file three tax returns:
    - partnership tax return
    - your individual tax return reporting 1/2 of the partnership losses
    - your partner's individual tax return reporting their 1/2 of the partnership losses

    And while partnership return can be DIY-ed, it probably should not be. Review Form 1065 yourself and decide whether you want to tackle it.

    The real dilemma here is that hiring a tax pro will definitely cost you, while it is unlikely to save you much (if anything).

    Michael nailed it on CA compliance for LLCs. Unfortunately, California is special.
    [email protected]628-241-0888
    0Reply
  • Robert Smith
    Member since 2025 · 2 posts · 0 votes
    1y

    First time post, apologies if in wrong spot, this seemed semi-appropriate.


    Wife and I have 3 rental properties and 1 home, all in CA.  Wife asking me to contact CPA's instead of doing taxes myself this year.  For last several years, have done them myself, added the 3rd rental in Q4 2024 others have been rented for last 10-20 years.  I have good record keeping although a bit old fashioned (journal w/hrs, mileage, receipts).

    No LLC although we are considering with the 3rd rental on board.

    Would be interested in hearing from CPA's who might fit our needs.  

    0Reply
  • Sean O'KeefePro Member
    CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 871 votes
    1y

    Looks like a number of Real Estate CPAs commented in this thread - reach out to a few to kick-off the conversation

    [email protected]628-241-0888
    0Reply
  • Sean O'KeefePro Member
    CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 871 votes
    1y
    Quote from @Robert Smith:

    First time post, apologies if in wrong spot, this seemed semi-appropriate.


    Wife and I have 3 rental properties and 1 home, all in CA.  Wife asking me to contact CPA's instead of doing taxes myself this year.  For last several years, have done them myself, added the 3rd rental in Q4 2024 others have been rented for last 10-20 years.  I have good record keeping although a bit old fashioned (journal w/hrs, mileage, receipts).

    No LLC although we are considering with the 3rd rental on board.

    Would be interested in hearing from CPA's who might fit our needs.  

    Looks like a number of Real Estate CPAs commented in this thread - reach out to a few to kick-off the conversation
    [email protected]628-241-0888
    0Reply
  • Robert Smith
    Member since 2025 · 2 posts · 0 votes
    1y

    Thx, will do

    0Reply
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