3 TAX TIPS from Clint Coons
When you’ve helped thousands of clients prepare successful tax strategies, you’re likely to have a trove of insight to share. Such is the case for Clint Coons, a founding partner at Anderson Business Advisors. As Tax Day looms, Think Realty caught up with Coons to learn some of his broader tax advice for real estate investors. It’s important to note that every person’s and business’s situation is different and that you consult with a certified public accountant before filing your taxes. 1. MAINTAIN DETAILED RECORDSAND STAYORGANIZED One pitfall that Coons sees often is investors’ lack of detailed bookkeeping. Don’t make your life a nightmare when April 15th rolls around. Ensure that you keep records of cashflow, expenses, profit and losses, and other key performance indicators. “Keep good books and records — that’s number one,” Coons said. “I see that as a problem for a lot of real estate investors. Keeping strong books and records is key to making planning and return prep go much smoother.” Keeping that vital information, however, isn’t enough. Real estate investors must also be well organized and should have a process for how to receive and maintain their data to make tax filing easier and to maximize their returns. Let’s look at deductions for expenses and how to track them, for example. Home offices are common for real estate investors. There are two important conditions to consider before tapping this deduction. The Internal Revenue Service states you “must regularly use part of your home exclusively for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room.” Also, investors must show that “you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction.” WORKING AT HOME
MILEAGE Your mileage can rack up when you’re driving between your properties. Starting on Jan. 1, 2020, the IRS allows citizens to write off 57.5 cents per mile driven for business use. There are a variety of mobile apps investors can use to make this tracking task easier, including Everlance, MileIQ, Hurdlr, and many others. Investors can also write off interest that accrues on loans. Investors should be able to deduct home mortgage interest, points, and mortgage insurance premiums. Recent regulatory changes have set the limit of deductions of up to $750,000 in mortgage debt. DEPRECIATION The IRS allows taxpayers to claim residential properties will depreciate over 27.5 years, meaning that at the end of each year, the value of improvements — also known as capital expenses for renovations — divided by 27.5 can be deducted from taxable income for 27.5 years. In other words, you can reduce income taxes because of your properties’ depreciation. INTEREST
2. COST SEGREGATION Coons said, “While it depends on the type of investor, folks should consider a cost segregation strategy.” This
20 | think realty magazine :: april 2020
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