Tax time is upon us again and the rules, they are a’changin! Do you know how to lower your real estate investing tax liabilities and maximize your current retirement plan? What is the best way account for capital improvements to your investment property? Is there a tax benefit to paying off a mortgage early? What would the financial and tax implications be if I sell and rent properties in the same entity? Am I better off selling and closing in December or January? Do you need a Real Estate Accountant?
If you are new to private enterprise, entrepreneurship or real estate investing, I strongly encourage you, if you haven’t done so already, to add a competent Certified Public Accountant (CPA) to your dream team. Some investors I’ve spoken with think a professional accountant is a costly luxury. I couldn’t disagree more. A well informed CPA is worth their fee for both consultation and tax preparation. They can save you many times their fee in avoiding unnecessary taxes. They can make sure you receive the maximum benefit provided by the IRS code. More importantly, they can provide guidance on how to manage your business in the most tax efficient manner. This alone can save you thousands of dollars in taxes every year, not to mention, avoiding IRS fees and penalties in the future.
When considering who you will select for your tax advisor you need to think about it just like you would when considering a doctor. I don’t know about you, but I wouldn’t go to a podiatrist for brain surgery, even if he gave me a discount any more than I’d want my neighbor’s cousin who sets up shop for 2 to 3 months a year to make a few hundred dollars preparing returns for his friends. I want a CPA who is also a real estate investor, a landlord, an entrepreneur and a person of high ethical standards and character. I want someone who faces the same challenges and opportunities as me. If they need the same benefits and deductions as I do, then they will be focused on the areas of the tax code that will serve my needs and grant me the protections I want.
When it comes to choosing your CPA, here are some interview questions you might consider asking. I’m always looking for advice on entity structuring, tax planning and retirement planning. These are my Top Twenty CPA Questions:
The CPA Top Twenty
- I’m a new investor, if you were my CPA, in what particular areas can you add value?
- Why are entities important and when is the best time to set up an entity?
- What is the best way to maximize deductions if I am still working a J.O.B.?
- I take a lot of seminars and buy CDs, are these deductible?
- What goes into deciding whether or not I should elect a C Corporation or S Corporation
- Can an LLC also be a C Corporation?
- How can a CPA help me to deal more effectively with lenders?
- How often should I meet with my CPA to discuss tax planning
- How should I prepare for this meeting?
- What’s the best way to keep track of my business for things like mileage, meals, and other expenses?
- Why shouldn’t I do my own taxes?
- Why shouldn’t I just go to H & R block?
- What is the biggest problem you have dealing with your investor clients?
- What is the biggest mistake you’ve seen an investor make and how could they have prevented it?
- What happens in an audit?
- What does a CPA do when his client is audited?
- Does an accountant get involved in their clients keeping of corporate records, minutes and such?
- What are the best things we can do to minimize being audited?
- What is your tax deduction philosophy, aggressive, conservative, or somewhere in between?
- Is there anything else I should be aware of to help my business be more tax efficient?
Feel free to add anything else you feel is important to the interview. You might ask for references or the number of real estate investors they have for clients. Year-end doesn’t have to be a problem for you or your CPA. With proper planning and ongoing communication you can have a very productive and profitable relationship.
One final note – The best time to schedule a CPA interview is usually mid-year because they should be through with the majority of filings for their current clients.
I hope this can get you started. Look out for future posts on Building Your Real Estate Investing Team.
thanks for the post..really helpful to me..
agree…lower the real estate investment tax..
my mom also is a registered CPA and she told me she does a lot of these..
this is a good news..lower real estate investment tax..
CPAs are a fantastic asset during tax time. I think people are crazy not to utilise the services of a professional.
You know it’s posts like this that can easily spur people on to learn about this. I found it to be pretty informative. I will be coming back here for more reading as I extremely enjoyed this!
I was just searching around the net for this particular type of information on real estate taxation and in particualr CPA. Glad I found it as this article is just what I was looking for. Thanks
Thanks for this article. I`m also glad to here about lower real estate investment tax. And also helpful are 20 top questions. So thanks once more
We wouldn’t be where we are at today without our GREAT CPA the value they can add can be unsuspecting especially if you find one who truly cares and has experience.
I made a mistake and rated this 2 stars when I meant to put 5 stars;it won’t let me correct my rating! I’m so sorry. Great post though!
Sounds like some great advise put forward here. I will have to take a look into using some of the tips recommended above in the article and leave a second post about my experiences with them.
Thanks for sharing!
Let us know how you make out! Thanks for visiting.
Augie
Definitely good information here. Thank you so much for your input! I am also going to surf around your blog and see what other useful information you have!
The one rule that’s not changing in terms of being able to offset your income to reduce your tax bill is the fact that you can use depreciation if it’s an investment property.
Some of my worse investment advice has been from an accountant that did not have personal experience with real estate investing. He didn’t get it. And books don’t teach everything.
Thanks for this post giving the information about the how to lower your real estate investing tax liabilities and maximize your current retirement plan. People who are interested in property dealing in India can visit this site or can call at 800-232-2343 or 0120-4338222 for any query or detail about the price payment plans or location etc.
When working with any trained professional, you still have to do your due diligence…remember, someone has to come in first in a graduating class and someone has to come in last…they both got the credentials. It is critically important to interview CPAs, Attorney’s and other professionals before engaging them. Get references and check them. You can save headache, heartache and money! It’s worth the effort!!
To your success…
Augie Byllott
A nice article. Those top 20 questions will surely give me a hand in selecting my tax advisor for my new business. Thanks!!
They certainly helped me! Thanks for visiting…
To your success…
Augie
What a great top 20 list. I never really thought of it but I’m going to start referring people to real estate accountants. There sure is a lot to know in this field – worth hiring a professional for sure.
Great list. Some of these question could indeed prove to be quite handy in choosing the best CPA for you. Thanks for sharing!
Nice post giving the information about the how to lower your real estate investing tax liabilities and maximize your current retirement plan.
Thanks Augie!
I like the idea of screening for a good CPA. After all, you’re trusting someone to make informed financial decision regarding your future.
Larry
Nice list of screening questions…wish I had it before I hired my last CPA. I assumed way to much and hired an old guy who had been a CPA for many years, not thinking that he could be in business in spite of himself. Boy did he screw up my books. Live and learn.
Larry
Very helpful article, I will definitely take these Top Twenty list into consideration before I hire my next CPA! Difficult enough to find a good one, this will help to find the best! Thanks a lot!
I totally agree with getting a real estate accountant.
Loved The CPA Top Twenty, I printed it and put it on my word desk. You actually helped me more then you think, since I need to hire a new CPA.
Fred.
I love the CPA interview questions. This is great for a real estate person like me.I already copied it in my file. I will strongly agree to the point that hiring a cpa will save us dollars instead of wasting them. I was afraid before that with a CPA to assist me in the taxation of real estate investment could mean tax manipulation and sooner or later I’ll be haunted by the authorities but I was wrong. There are some taxation technicalities that we, Non-CPAs, do not know that we sometimes tend to get overly taxed.
To be a true professional we need professionals in the areas we don’t possess their expertise. My CPA has helped me run my business more effectively, more productively and more profitably. Besides, he stays on top of regulatory changes that can impact our future profitability without proper planning. Thanks for your comment!
To your success…
Augie
Your top 20 list comes very handy. I was looking for something like this.
Thanks a lot.
Nice list, and just the sort of thing I was looking for. I’ll package them into an email and fire it off to my shortlist of accountants. Thanks!
Thanks Dave, glad to help!
I’m just learning about property investment and came across this post. Thanks for this, especially the top 20 CPA. Will be really helpful when I start looking for an accountant.
I don’t take any chances. Having an LLC company as an internet business where I can work from home makes it mandatory for me to use a CPA. The process is so complicated. I especially like the list you provide. I will definitely address these matters with my accountant.
Some top advice and information here. I am quite new to property investment so this post is very helpful.
Purchased a home for 275,000 interest only loan ended up renting after couple months.In 2011 gave up as a deed in lieu .Received a 1099c with a FMV for 105,000 and discharge debt for 212,000,please helpe calculate CODI income .Thanks
You need a CPA to help you through this. There may be a variety of interpretations based on your personal situation. Good luck!
Tax time… all our favorite time of year, lol. Thanks for the tips, gleamed a few things I didnt know!
I primarily invest in real estate and I’ve owned a couple of businesses. And, in my experience, a good tax adviser is worth their weight in gold.