Strategic Tax Tools for Real Estate Investors

Let’s talk about tax, baby

Okay.. maaaybe this week’s newsletter isn’t going to bring out the dance moves like the iconic all female hip hop group Salt N Pepa, but it is going to teach you a thing or two about taxes.

Tax can easily be one of the least enjoyable things to think about when it comes to your rental property journey. It can be filled with so much complicated jargon and billions of different options depending upon gazillions of specific circumstances (yes, I may have exaggerated a little there, but I get you, it can really feel that way).

So, in this week’s episode of the Lady Landlords Podcast, I got together for a chat with Geena Young, an amazing CPA (and Lady Landlord) to better understand some useful tools we can harness.

Tax deductions

Perhaps one of the best tax benefits of owning rental property is the ability to deduct operating and owner expenses. The necessary and ordinary expenses as explained by the IRA can include the following: advertising costs, leasing commissions, property management fees, repairs, maintenance, supplies, landscaping, pest control, homeowner and landlord liability insurances, utilities paid directly by the landlord, and professional service fees such as accountants and real estate attorneys.

A cost segregation study is the process of allocating the cost of your property among the multiple components that make up the property. This allows you to actually depreciate your property over accelerated schedules, resulting in a huge boost of annual depreciation expense.

In layman’s terms, a cost segregation study is a commonly used and highly powerful strategic planning tool that allows an investor who has purchased, constructed, expanded, or remodeled any of the real estate they own to increase cash flow (yay) by accelerating depreciation deductions and deferring federal and state taxes (double yay).

This process can provide significant savings

The bottom line is, a cost segregation study on your property lets you legally wipe off or reduce your income tax liability early in your rental property investment journey. Nearly anyone can do a cost segregation survey, but doing it right can be the issue. So it’s always best to seek help from a CPA for peace of mind. ​

Be safe, not sorry

To claim back any accumulated tax expenses of owning a rental property will require a good record of costs and paper trails, so keep organized.

Even better still, mortgage interest paid on loans used to purchase rental properties are tax-deductible too, as well as interest paid on credit card balances for things like appliances and fixtures. So it may be a wise idea to get yourself a business credit card to keep personal and business expenses separate. ​

Ladies, all the ladies, louder now!

🌟 Cost segregation and tax deductions

Are both super powerful ways for you to harness the maximum income from your property portfolio.

🌟 Stay organized!

Ensure all your paperwork is filed and clear to avoid any nasty unexpected tax bills or fines.

🌟 Don’t let the jargon phase you

There is so much help out there to ensure you are making the most out of your valuable portfolio. Chat with me about my mentorship program to help you grow your own knowledge and confidence to look after your valuable investments.

​ Listen to this week’s Lady Landlord podcast episode to hear my full conversation with Geena yourself!