In this episode, you’ll hear:
- The tax consequences of having too many entities
- The importance of understanding key terms when speaking with your CPA or attorney
- Obtaining the deductions you want through proactive tax planning
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Real Estate Investors Shouldn’t Create Too Many Entities
A common legal and tax mistake that new real estate investors make is creating too many entities from the outset. Other attorneys and CPAs may not understand the nuance of growing and operating a real estate investing business and lead unknowing investors down the wrong path which can be expensive to manage and frustrating to deconstruct. CPA Amanda Han stated that it’s much easier to layer on additional or more complicated entities down the line as your real estate portfolio grows.
Real Estate Investors Should Consult a CPA about their Investing Strategy
While real estate investing strategies are available to nearly all real estate investors, not all tax strategies are. Just because you hear about a tax strategy on a real estate investing podcast or at a workshop, doesn’t mean it can apply to you. Further, many tax-saving strategies for real estate investors have a lot of fine print. If you don’t follow all the rules to obtain a deduction it’s off the table. Working with a strategic real estate CPA to ensure you understand the nuances of your exit strategy is a key first step to ensuring you’ll have the tax burden you’re expecting at the end of the year.
Real Estate Investors Should Tax Proactive Steps to
Just like asset protection, tax strategy doesn’t work backward either. If the facts on the ground don’t support a deduction, there’s nothing your CPA can do to change your eligibility after the fact. For example, one of Amanda Han’s clients created a short-term rental and planned to take certain deductions based on that property classification. However, his average rental length was over 7 days so he was disqualified from taking the deduction. If he had discussed this strategy with his CPA from the outset, or even midyear, he may have been able to shift his average rental length in time to be able to claim the deduction.
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Resources Discussed in This Episode
- Download Amanda Han’s free E-Book
- Purchase Amanda Han’s Biggerpockets Tax Books
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DISCLAIMER: Although Bonnie is an attorney she doesn’t give legal advice without a written and dually signed engagement agreement. All episodes of House of Horrors are educational and informational only. The information discussed here isn’t legal advice and isn’t intended to be. The information you listen to here isn’t a substitute for seeking legal advice from your own attorney
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