Tax Season Preparation for Real Estate Investors

The 2024 tax filing season officially began on January 27th, making this the perfect time to get started organizing your financial documents and strategizing for a smooth tax process. Whether you’re an individual filer, a business owner, or managing investments like real estate, proper preparation can help you maximize deductions and stay ahead of key deadlines. 

Below is a concise guide to help you navigate the 2024 tax filing year.

Key Dates to Remember

Individuals:

• April 15, 2025: Filing deadline for individual tax returns (Form 1040).
• October 15, 2025: Extended deadline for individual tax returns (if an extension is filed).
• Estimated Payments: It’s important to understand how your income is taxed and if estimated payments are applicable to you. Below are the key dates for estimated payments (if applicable):
  – First Installment: April 15, 2025
  – Second Installment: June 16, 2025
  – Third Installment: September 15, 2025
  – Fourth Installment: January 15, 2026

Businesses (Flow-through entities):

• January 31, 2025: Filing deadline to send out W-2’s and 1099’s
• March 17, 2025: Filing deadline for partnerships and S-corporations.
• September 15, 2025: Extended deadline for partnerships and S-corporations if an extension is filed.

Unique Aspects of Real Estate Investments

• Passive Activity Loss Rules: Real estate investments are often considered passive activities, and losses can typically only offset passive income. Be sure to speak to your tax advisor and understand the implications of how your real estate investments impact your overall tax position.
  
• Depreciation: Real estate can offer significant tax advantages through depreciation. However, with the sunsetting TCJA rules, the advantage is decreasing with bonus depreciation ramped down to 60% in 2024.

General Tax Season Preparation Tips

Gather Documentation:

• Income: W-2s, 1099s, K-1s.
• Expenses: Property taxes, mortgage interest 1098, medical expenses and health insurance information, childcare expenses, tuition and fees, and charitable donations.
• Prior-Year Information: Prior-year federal and state tax returns, overpayment details, and current year estimated payments.
• Most tax advisors will provide a tax organizer as a checklist to ensure you have all relevant information.

Understand Filing Extensions: Consider filing an extension if your K-1s or other documents are delayed to avoid filing inaccuracies.

• Filing an extension can have a bad reputation, but it is a completely normal part of the process and can be advantageous to ensure you file the final and correct information. It can ultimately save you time and money and should be considered if your tax situation is more complex.
• Those impacted by natural disasters may have automatic extensions to file and pay granted by the IRS.

Communicate with Professionals: Work closely with your CPA or tax advisor to ensure all aspects of your portfolio are properly accounted for. Be sure to meet or speak with your tax advisor prior to filing to fully understand your tax return.

Updates from Our Team

• K-1 Timelines: We aim to deliver K-1s by March 12, 2025, to help you meet filing deadlines.
• Tools and Resources: We deliver our K-1s and communicate via Juniper Square, your online portal. This ensures safe delivery of sensitive information and long-term record-keeping.
• Expectations: Proactive communication ensures a smooth tax season for all parties involved. We aim to deliver all K-1s by the stated date above; however, should something occur to delay delivery, we will promptly email you with a reset expectation.

Looking Ahead: 2025 Tax Planning Tips

• Legislative Changes: Stay informed about potential tax law adjustments that could impact real estate investors. As a new administration takes over and implements their agenda, expect a lot of chatter on tax law changes later this year. Most information will be noise, so there isn’t a need to comb through everything, but it is important to periodically follow any updates.
• Mid-Year Check-Ins: Schedule a review with your CPA mid-year to address any changes in your portfolio, tax position and/or upcoming tax law changes. Being proactive and leaning on your tax advisor for advice, rather than just being a compliance officer, will make this time next year worry-free.

Takeaway

Preparation and communication are essential for a smooth and stress-free tax season. By staying organized, collaborating with your tax advisor, and utilizing available resources, you can confidently navigate this time of year.

If you’d like to learn more about the tax advantages of investing in commercial real estate and how it can enhance your overall tax strategy, reach out to our team here.