Not all CPA’s are created equal. Some know medicine, manufacturing, or aerospace and may not know too much about real estate… Whether a landlord owns one or one hundred properties, it’s wise to talk to or retain a CPA that knows all the intricate real estate tax codes to ensure you’re paying the least tax.
Here are a few basic areas that can save landlords money.
1. Pass-Through Income
The Job Cuts & Tax Act allows individual taxpayers to deduct up to 20% of the qualified rental income. This is called a Qualified Business Income Deduction (QBID) and every landlord could be getting this deduction.
2. Repair & Maintenance Safe-Harbors
What happens when repairs exceed $2,500? Does the small taxpayer have a “safe harbor” to reduce their tax liability – the answer is YES. Under the IRS’s safe-harbor rule the repair limit is limited to the lesser of either 2% of the building value divided by the cost of improvements or $10,000. This can get tricky, so talk with a CPA about this scenario.
3. California Withholding and Exemption Certificates
The CA Franchise Tax Board (FTB) does require property managers to withhold 7% of gross rent payments for non-CA residents. Landlords can apply for a withholding waiver (using Form 588) which will increase their cash flow. It’s a simple form and may be worth your time?
If you want more information, Gregory Beck, CPA, really understands real estate. His number is 714-538-1040 Ext. 101 and he’s happy to chat.
This is not tax advise, but rather basic suggestions on a very general overview of potential savings. Be sure to talk with your tax adviser for more detailed information.