Should I hire a tax planner/advisor/preparer or DIY this?

Question

Hi BP,

I recently acquired my first property, which is a house in Hawaii where I'm renting a portion of it to a tenant. As the tax season is coming up, I'm starting to think if it's worthwhile to hire a tax planner (mostly going forward, as 2021 is nearly over) and tax preparer (same person?). I think I could handle the tax preparation myself, but I have some questions around how to divide up the house between the rented portion and my own, and how to depreciate some renovations I am doing before renting out more of the space. The property is in my name (no other entities).

Is there much value in having the tax planner be local to the state where the property is located, or anywhere in the US is fine? I'm fine with meeting remotely over a video call.

Also, where could I learn about what format to keep my records in so that they are easy to import/use by a CPA or by myself at tax time? Any recommended software for this? I'm talking about records like rent revenues, expenses, and depreciation schedules. I've been keeping detailed records so far in spreadsheets.

Thank you 🙂

Michael Plaks · Answer

@Pavel Bennett

Taxes for a straight rental home are relatively straightforward, however a mixed personal/rental situation is not. So you can either do some self-education and try to DIY your taxes or hire an expert. The difference is the usual DIY dilemma: an expert will do it better but not for free. If you're not factoring the value of your time, then hiring an expert for one house-hack may not "pay for itself" in terms of strictly dollars. If you do value your time and/or value the accuracy of the result - then hire a pro.

Here is one blog post to start with: https://www.biggerpockets.com/...

Planning is a good idea if you have something to plan for. If we're only talking about this one property, there's some tax planning possible, but not a whole lot of it, probably. If you're planning more real estate deals in 2022, then your need for tax planning is greater. Tax planning is not cheap.

Unlike your home state of WA, HI does have state income tax, starting from the definition of "non-resident." While a local HI accountant is not a requirement, you'd need someone who understands HI taxation. This forum has multiple tax accountants specializing in real estate, and we all work nationwide. Not many of us will offer you tax planning or answering tax questions while allowing you to DIY tax preparation. My firm won't, for example.

Your question about recordkeeping is for the tax person that you will choose. Different accountants have different requirements/expectations. My firm, for example, accepts spreadsheets, expense tracking apps like TaxBot or Expensify, accounting software like Stessa (free and relatively easy) or QuickBooks (the opposite) and so on, but we need to make sure that these tools, including spreadsheets, are correctly used. Other accountants may set different rules. For yourself, spreadsheets are certainly fine, whatever works for you.

Daniel Hyman · Answer

@Pavel Bennett

It sounds like you are looking for a CPA firm that can provide education and strategies that you can implement and then DIY going forward. There are firms like that. It's not a one size fits all so keep trying until you find a firm that can work with your needs.

Caroline Gerardo · Answer

Quickbooks is pretty standard and they can refer someone online to set up what you want. Intuit parent company also owns turbo tax. Its very easy to use and saves your records in the cloud, but backup to a memory card.

Should I hire a tax planner/advisor/preparer or DIY this?

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