Year-Round Tax Planning

Why tax planning should not start in April

Most real estate investors think about taxes once a year, in April. That approach leaves money on the table, because the real savings happen before a transaction closes, not after.

Once you have bought the property, started the business, or taken the trip, most of your options are gone. Planning ahead lets you structure the deal before you close, document expenses as you go, and talk through big decisions before they happen.

Here are a few highlights from this week’s article:

Trigger events are your cue to plan. Buying or selling property, starting a business, getting married or divorced, having a child, expecting a large gain, approaching RMD age, investing in a syndication, or buying a new primary residence. If you are selling, the time to discuss capital gains options is 90 days before the sale, not on settlement day.

Planning is an investment, not an expense. A cost segregation study might run $2,000-$4,000. If it accelerates $100,000 of depreciation and you are in the 24% bracket, that is $24,000 in tax savings in one year.

Business travel lives or dies on documented intent. The IRS does not ask where you went. It asks why you went. Plan the paper trail before the trip, not after.

Repairs vs. capital improvements. Fixing a broken window is a repair, deductible now. Installing new windows is a capital improvement, depreciated over time. If you are not sure, ask your CPA before you approve the work order.

Lease vs. buy a business vehicle. There is no universal answer. It depends on your tax bracket, how long you keep the vehicle, and whether you can use accelerated deductions this year.

A deduction is not a reason to buy something. Ask yourself: would I do this if there were no tax deduction? If the answer is no, do not buy it. Good business decision first, tax benefit second.

The full article also includes a checklist of 6 things to do before January ends, plus answers to common questions.

Read the full article here: https://insights.realestatetaxpro.com/year-round-tax-planning/