Tax tips for Real Estate Investors

5 Tax Tips for New Real Estate Investors

by on November 28, 2017 8:47 pm under ,

All real estate investors know that adding value to a property is the name of the game. The most successful and profitable investors, however, know that saving money anywhere possible is how you make it big. With all of the transactions and contracts involved in flipping a house, there are a lot of opportunities to maximize your return when it comes to paying taxes. Ignoring the financial details of tax regulations could be a very costly mistake for your business. Make sure you research and take advantage of all the deductions to which you are entitled. That being said, don’t risk getting audited by avoiding the subject all together or taking questionable deductions.

Generally, the real estate investment business is for entrepreneurial folks only. Being self-employed as an investor or investing as a side hustle gives real estate investors the freedom of making their own decisions on the project, but also exposures them to not having a full corporate team behind them. For example, you’ll have to pay your bills and taxes all by yourself: there is no accounting department to help you with the details.

Being on top of your finances is the name of the game, so I strongly believe that a self-employed person should have a complete knowledge about all the tax deductions granted to the sector by the government or tax authorities. We will discuss some of the tax tips for deductions which are allowed to real estate investors but more importantly, let’s look at ways to make sure you are staying above board when it comes to tax preparation.

Know Your Deductions and Track Your Expenses

As an independent real estate investor, you must be aware of the various tax breaks available to you. These may include the cost of appraisal fees, business cards, commissions paid, advertising signage, escrow fees, insurance, vehicle expenses and more. A little research online will help you navigate your state, local, and federal opportunities to deduct business expenses. It’s well worth the effort to read up and even network with some experienced house flippers for more information.

Go Digital to Make Things Easier

mileiq-vert-blEven if you hire an accountant to help you prepare your taxes, they will need a record of all your expenses and vehicle use. Instead of the old shoebox full of receipts technique, explore the App Store for various digital recording services. MileIQ is a great tool for recording your drive history, and Evernote is great for storing receipts. For general bookkeeping, Mint has a fairly robust free edition that allows you to categorize expenses and add notes. Having a backup like this will save you hours of work at tax time in addition to all the money you’ll save. When tax time comes, this electronic record keeping is going to save you a handsome amount. Make sure to enter every detail of your business expenses.

Travel is a Business Expense

Most people forget that travel as a self employed person is usually a business expense. Every time you drive to the investment property or to the hardware store, you are technically on the job and can deduct a set amount per mile on your taxes as business expenses. Again, there are a lot of apps that will automatically record your trips and export them as spreadsheets for you. Be sure to add the details of the trip including the car used and purpose of the trip.

Hiring an Accountant Saves the Day

accountant-1794122_640Hiring an accountant, especially a tax accountant, is worth the expense. Even though it will seem like you are paying for something you could do yourself, they will know the ins and outs of the tax code much better than you do and be able to save you money in the long run. Also, if you do get audited, you will be very glad that you have an accountant on your side to help avoid trouble and headache with the government. Lean on the expertise of these professionals.

Do you want some more tax tips?

As they say, knowledge is power. The more you know about tax policy for real estate investors and the closer you are monitoring your own expenses the more you can save. Here are some things you should be recording so that you can deduct them at tax time:

  • Cost of real estate coaching, house flipping education, and contractor training
  • All property marketing costs including flyers, creation and maintenance of a website, the creation of business cards and mailers
  • Renewal and licensing fees for real estate professionals
  • All kinds of travel including airfares, lodging expense, and hotel bills
  • Transportation expense including the gas, mileage, maintenance and repair of the automobile, and parking expenses
  • All of the costs which you have to bear to promote and sell the house

Author Bio: Jessica Watson has been writing for websites and blogs for three years now. She had a fair share of writing in various niches but her main focus on business, finance, social media, and technology. Currently, she is working with Aurion UAE who offers UAE company formation.They are providing their services across all states of UAE.

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