With 2023 coming to a close, it’s the best time to get ahead of your taxes. Get with your tax professional, figure out where you stand, and then make some final moves that could save you big bucks when it comes to tax time in a few months. Make sure you know exactly what your options are before you run out of time to do something about it.
We talked to two expert real estate CPAs and asked them what they are advising clients to do, and importantly not do, in these last few weeks of the year.
Timing is Everything
Amanda Han is a real estate CPA and tax strategist and the author of The Book on Tax Strategies for the Savvy Real Estate Investor for BiggerPockets. She invests all across the U.S.
BiggerPockets: What should investors be looking to do at the end of the year to prep for taxes?
Some of the things investors should look at with respect to year-end is [thinking about] the timing of a transaction. For example, if you are close to closing on a sale that will have a lot of gain, consider deferring that income into Jan. 1 of next year. By delaying the close of that transaction for even just a few days, you can defer the taxes for a whole entire year.
The opposite applies for expenses. If you need some expenses to offset this year’s income, consider prepaying some of those recurring items before the end of the year to accelerate the write-off into this year.
Even payments charged on a credit card by year-end can be potentially tax deductible. You may not need to have paid off the credit card [for it to count for tax year 2023].
BiggerPockets: What should investors avoid?
One thing investors should avoid is spending money just for purposes of tax deductions. In other words, if it’s not something you need, don’t pay for it just because you may get a tax benefit.
Be Proactive and Communicate With Your Tax Professional
Danielle Rutigliano is a CPA and real estate investor based in Long Island, New York. She is the owner of…