Real estate investors may be missing out on substantial tax savings, according to Amanda Han, a CPA and real estate investor. Many tax returns, she notes, lack optimization for available deductions, leading to significant losses. The U.S. tax code favors real estate investors, and upcoming provisions from the recent “One Big Beautiful Bill” are expected to enhance these advantages, particularly with the potential for rental property owners to significantly reduce their taxable income.
Han reported that, on average, 40% of the tax returns she reviews aren’t set up to maximize deductions, resulting in thousands left unclaimed. Strategies for investors can include expense tracking—covering everything from mortgage interest, property taxes, and insurance, to travel for property inspections or educational events.
Notably, the renewed benefit of 100% bonus depreciation allows investors to claim substantial tax deductions upfront rather than spreading them across years. This can provide significant cash flow benefits. Additionally, the Qualified Business Income (QBI) deduction can reduce taxable income by up to 20% for eligible business ventures, including rental income.
As the tax season approaches, experts recommend proactive planning and maintaining organized records to alleviate the stress that often accompanies tax preparation. A systematic approach to capturing expenses and consulting with tax professionals throughout the year can facilitate more efficient tax filings.
Key Points:
- Why this story matters: Real estate investors can leverage tax advantages to maximize returns and save thousands.
- Key takeaway: Effective tax planning, including optimizing deductions and understanding bonus depreciation, is crucial for financial success in real estate.
- Opposing viewpoint: Critics may argue that complexities in tax law can be overwhelming, leading some investors to avoid maximizing their deductions.
