SM : Are there any new tax laws that investors need to be aware of ?
JD : Proposition 19 is the big one this year . It is a property tax increase that greatly limits the scope of the parentchild exclusion for increases in property taxes .
SM : What is the best thing investors can do to plan for tax payments , so they ' re not caught by surprise ?
JD : I set my clients up with quarterly estimates , so they are already paid in . Additionally , if they have a sale , we can figure out what the resulting tax increase would be .
SM : What are some of the common mistakes you see investors make when it comes to tax planning and preparation ?
JD : One of the most common mistakes I see is that investors will use their purchase price as their depreciation on their taxes . What they should be doing is using the escrow statement to determine their basis in the property and then allocating this basis between building — which is depreciable for taxes — and land , which is not . While doing this correctly decreases depreciation deductions , claiming the purchase price as 100 % deductible is very easy to identify .
SM : What documentation is essential for investors to have at tax time ?
JD : The biggest ones are mileage logs , meals log , and a separate bank account to track rent and expenses .
SM : Do you have any additional comments or thoughts to share with Realty411 readers ?
Photo by Nataliya Vaitkevich from Pexels
JD : When you ’ re routinely incurring expenses for the management of a few properties , a Supplemental Business Expense Form can be useful to split said expenses between the properties .
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