Tax Strategies for Real Estate Investors

Can you write off your kid’s allowance as a tax-deductible? How about your home?  Tax expert and CPA Amanda Han says you can!

Amanda Han is the Assistant Managing Director of Keystone CPA Inc., a tax consulting and accounting firm that has been providing first-class tax strategies for Fortune 500 companies for more than 38 years. With over 18 years’ public accounting experience in the Lead Tax Group, Amanda has developed her specialization in real estate, self-directed investing, and individual tax planning for clients.

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Amanda is a frequent contributor and educator to some of the nation’s top investment companies and is a leading expert on retirement investing. Amanda’s cutting-edge tax strategies have been featured in prominent publications including TIME Magazine Online, Bigger Pockets.com, Realtor Magazine, and AllBusiness.com, a Dunn & Bradstreet Company. She is certified by the CA State Board of Accountancy and is a member of the prestigious American Institute of Certified Public Accountants (AICPA) practicing in all 50 U.S. States.

In this episode, Amanda shared to me the tax benefits in real estate investing, turning personal expenses into a legitimate tax-deductible item, using depreciation and 1031 exchange to defer tax, the effects of tax reform law in real estate investments, the benefit of the Opportunity Zone, and some tips on hiring the perfect tax advisor for real estate investors.

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In this episode, we’re discussing…

  • [05:08] The tax benefits in real estate investing

  • [07:32] Tips on how real estate investors can legitimately turn personal non-deductible expenses, like their home and their kid’s allowance, into a legitimate business deduction

  • [12:14] How depreciation helps real estate investors reduce overall taxes

  • [14:12] Depreciation surprising benefit: Tax write-offs

  • [16:47] How to sell a property and defer paying taxes via the 1031 exchange

  • [18:30] How descendants can inherit the property you invested in without paying the capital gains taxes acquire during your lifetime

  •  [19:21] The effects of Tax Reform Law in Real Estate Investing

  • [22:43] Why real estate values across the nation have gone up and How real estate investors can exploit this opportunity   

  • [24:03] How real estate investors can maximize the brand new tax benefit called the “Opportunity Zones”

  • [33:31] Tips on finding and hiring the right tax advisor for you

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Amanda’s Top Tips:

  • “One of the major benefits of real estate versus stock investments is the ability to deduct real estate expenses. When you invest in the stock portfolio you don’t have any expenses to write off. It’s different in terms of real estate because IRS treats real estate investors the same way they treat business owners. This means all of a sudden you’re able to take a tax write off, just like if you actually own a business.”


  • “If you have a 14-year-old or 25-year old, who's helping you out with Excel spreadsheets when you’re analyzing deals, pay them to help in your business. [And because] you hired them in real estate, now it’s a legitimate business expense [that] you can take a write off for.”



  • “Historically, over the long run, real estate value does increase. So even though your real estate might be increasing in value, the IRS still allows you to take a deduction, as if it was decreasing.”



  • “As an investor, if I sell the property, I can do a 1031 and replace it with a couple more properties a couple of years down the road. I can pay the tax at that time or I can do another 1031 and then replace it with more properties. You can continue to do 1031 exchanges. There are no limitations to how frequent, you can do it. Theoretically, you can use that across your entire lifetime and defer the taxes, until death.”



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  • “The good news is, the vast majority of changes that came out of tax reform has been favorable for real estate investors. All of the limitations and new restrictions that are unfavorable actually do not apply to investments.”



  • “Across the nation, real estate values have gone up and so have primary homes. A lot of people are sitting on equity in their homes that might not be doing anything. The equity is just sitting there. People are refinancing to tap into that cash, and then using that cash to invest in rental property or syndication. When you do that, it’s very important to let your tax advisor know, because they can help you turn that from a non-deductible interest into a legitimate deductible business.”




  • “Opportunity zone is a government incentive that came out which basically wanted investors to put money into “distressed areas” in the nation, across all states and cities. Basically, [what happens] is when a company goes out and invests in real estate that is located in these distressed areas, [they] can defer the capital gains.”




  • “The major benefit of the Opportunity Zone is that if you hold that opportunity zone investment for at least 10 years, then you pay no capital gains at all on the appreciation of the appreciation of the property.”




  • “The deductibility of something is really different - taxpayer to taxpayer. So don't immediately assume you can’t do something. Ask your tax person and plan. Say to him ‘How can I?’ Maybe you can, maybe you can’t, but you now put your creative hat on and figure out ‘Is that something I can do?’”

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Nichole’s Top Tip:

  • “You don't buy real estate for tax purposes, but for cash flow and for income, to be able to have another income stream. But now that you have it, and you’re getting that income, you get to take advantage of the tax benefits [by using your] overall taxable income. It’s a multi-layer approach that is just giving you overall benefits.”

 

 

Resources: 

 

Resources About Amanda:

 

Categories: Real Estate, Investment, Tax

Tags:



capital gains tax, tax strategies, real estate investing, tax solutions, real estate investor, investor, opportunity zone, tax deduction, tax reform law, non-deductible, 1031 exchange, keystonecpa, self-directed investing, individual tax planning, tax expert, accountancy expert, Tax write-offs, tax advisor, tax benefits, income, tax-deductible items, IRS

ABOUT AMANDA HAN

Amanda has over 18 years of experience as a CPA  with special emphasis in real estate, self-directed investing, and individual tax planning. Amanda has extensive "Big Four" public accounting experience in the Lead Tax Group servicing clients in the real estate industry. She provided tax consulting and tax compliance for companies engaged in land development, residential development, medical facilities, and conglomerate shopping malls. Subsequent to her work at Deloitte, Amanda served in the Corporate Tax Department for an international Fortune 500 Company in the high tech industry and was responsible for quarterly provisions and various aspects of SEC reporting. Amanda has numerous years of experience in working with international companies in terms of federal and multi-state tax planning as well as audit representation and resolution.

Amanda is a frequent contributor and educator to some of the nation’s top investment companies and is a leading expert on retirement investing.  Amanda’s cutting-edge tax strategies have been featured in prominent publications including TIME Magazine Online, Bigger Pockets.com, Realtor Magazine, and AllBusiness.com, a Dunn & Bradstreet Company. She is certified by the CA State Board of Accountancy and is a member of the prestigious American Institute of Certified Public Accountants (AICPA) practicing in all 50 U.S. States.





Nichole Stohler