{"id":5717,"date":"2024-12-01T10:48:00","date_gmt":"2024-12-01T14:48:00","guid":{"rendered":"https:\/\/propertyonion.com\/education\/?p=5717"},"modified":"2026-03-17T19:36:06","modified_gmt":"2026-03-17T23:36:06","slug":"10-tips-for-real-estate-investors-to-prepare-for-2023-taxes","status":"publish","type":"post","link":"https:\/\/propertyonion.com\/education\/10-tips-for-real-estate-investors-to-prepare-for-2023-taxes\/","title":{"rendered":"10 Tips for Real Estate Investors to Prepare for 2024 Taxes"},"content":{"rendered":"\n<p>The new year is here, so it\u2019s time to prepare for tax season. While taxes can be complicated, your filings provide numerous opportunities for deductions, credits, and other incentives. Smartly navigating your taxes can bring lucrative returns now and in the future. What can you do to stay ahead of the curve? Here are 10 tips and tricks for real estate investors preparing for 2024 taxes.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>Avoid penalties by hiring a professional tax preparer.<\/p>\n<\/blockquote>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 ez-toc-wrap-left counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">In this Article:<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/propertyonion.com\/education\/10-tips-for-real-estate-investors-to-prepare-for-2023-taxes\/#1_Get_Organized\" >1. Get Organized<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/propertyonion.com\/education\/10-tips-for-real-estate-investors-to-prepare-for-2023-taxes\/#2_Hire_a_Professional_Tax_Preparer\" >2. Hire a Professional Tax Preparer<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/propertyonion.com\/education\/10-tips-for-real-estate-investors-to-prepare-for-2023-taxes\/#3_Look_for_Deductions\" >3. Look for Deductions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/propertyonion.com\/education\/10-tips-for-real-estate-investors-to-prepare-for-2023-taxes\/#4_Rethink_Your_Capital_Gains\" >4. Rethink Your Capital Gains<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/propertyonion.com\/education\/10-tips-for-real-estate-investors-to-prepare-for-2023-taxes\/#5_Consider_the_1031_Exchange\" >5. Consider the 1031 Exchange<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/propertyonion.com\/education\/10-tips-for-real-estate-investors-to-prepare-for-2023-taxes\/#6_Use_the_Qualified_Opportunity_Zone_Funds\" >6. Use the Qualified Opportunity Zone Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/propertyonion.com\/education\/10-tips-for-real-estate-investors-to-prepare-for-2023-taxes\/#7_Contribute_to_a_Traditional_IRA\" >7. Contribute to a Traditional IRA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/propertyonion.com\/education\/10-tips-for-real-estate-investors-to-prepare-for-2023-taxes\/#8_Find_Energy-Efficient_Upgrades\" >8. Find Energy-Efficient Upgrades<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/propertyonion.com\/education\/10-tips-for-real-estate-investors-to-prepare-for-2023-taxes\/#9_Check_the_FICA_Rules\" >9. Check the FICA Rules&nbsp;&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/propertyonion.com\/education\/10-tips-for-real-estate-investors-to-prepare-for-2023-taxes\/#10_Plan_for_the_Future\" >10. Plan for the Future<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/propertyonion.com\/education\/10-tips-for-real-estate-investors-to-prepare-for-2023-taxes\/#Making_Tax_Season_Easy\" >Making Tax Season Easy<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Get_Organized\"><\/span><strong>1. Get Organized<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>First, <a href=\"https:\/\/propertyonion.com\/education\/this-is-how-real-estate-investors-need-to-prepare-their-2023-taxes\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"getting organized  (opens in a new tab)\">getting organized <\/a>is essential for your taxes. Waiting until the last minute to assemble your records can result in headaches and late tax filings. Punctuality and preparedness are paramount in real estate, so apply the same mindset in organizing your financial documents.&nbsp;<\/p>\n\n\n\n<p>Keep detailed spreadsheets of all income you\u2019ve earned from real estate investing in 2024. Then, you can make the final additions and be ready for filing once the new year arrives. The Internal Revenue Service (IRS)\u00a0<a aria-label=\" (opens in a new tab)\" href=\"https:\/\/www.nerdwallet.com\/article\/taxes\/penalty-for-failure-to-file-taxes\" target=\"_blank\" rel=\"noreferrer noopener\">applies a 5% tax<\/a>\u00a0for every month your filing is late, so avoid this cost by being punctual.\u00a0<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Hire_a_Professional_Tax_Preparer\"><\/span><strong>2. Hire a Professional Tax Preparer<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Being late with your tax filings is one thing, but it\u2019s another to be incorrect. Correct calculations ensure you don\u2019t underreport or overestimate your yearly income. The IRS&nbsp;<a href=\"https:\/\/www.irs.gov\/payments\/accuracy-related-penalty\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">assesses a 20% penalty<\/a>&nbsp;if you underpay your taxes. While the IRS may be sympathetic, you must fork over the money if you neglect or disregard your filing.&nbsp;<\/p>\n\n\n\n<p>Avoid these penalties by hiring a professional tax preparer. These experts know how to file everything correctly and navigate the complicated weeds of the IRS. Additionally, they\u2019ll know what deductions and credits you\u2019ll qualify for, justifying their expense.&nbsp;<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>Finding incentives is critical to getting the most out of your yearly taxes. <\/p>\n<\/blockquote>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Look_for_Deductions\"><\/span><strong>3. Look for Deductions<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Your income can increase if you own numerous properties and businesses. Therefore, your tax liability will be higher than the average person\u2019s. Consider these deductions when looking for ways to reduce your taxable income.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Home office:\u00a0<\/strong>Working remotely has become more common recently, opening many to the home office deduction.\u00a0You can deduct this expense\u00a0<a aria-label=\" (opens in a new tab)\" href=\"https:\/\/renovated.com\/real-estate-tax-benefits\/\" target=\"_blank\" rel=\"noreferrer noopener\">if your office is 300 square feet<\/a>\u00a0or under.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Maintenance:\u00a0<\/strong>You can take deductions for the maintenance you perform on rental properties. The IRS says you can\u00a0<a aria-label=\" (opens in a new tab)\" href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/tips-on-rental-real-estate-income-deductions-and-recordkeeping\" target=\"_blank\" rel=\"noreferrer noopener\">deduct the cost of supplies<\/a>, materials, repairs, and upkeep.\u00a0<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Business expenses:\u00a0<\/strong>Running a business means you have costs associated with your company. Fortunately, the IRS lets you deduct advertising, automobile, and legal fees, among others.\u00a0<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4_Rethink_Your_Capital_Gains\"><\/span><strong>4. Rethink Your Capital Gains<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><a href=\"https:\/\/propertyonion.com\/education\/short-term-versus-long-term-capital-gains-tax\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"Capital gains (opens in a new tab)\">Capital gains<\/a> are integral to real estate investing, so ensure you get the most out of them for lucrative returns and less tax burdens. Many investors have aimed for short-term capital gains because of the hot seller\u2019s market since 2020. However, it may be wise to rethink your approach.<\/p>\n\n\n\n<p>It may be time to look at long-term capital gains if your area is moving into a buyer\u2019s market. The properties you\u2019ve held for over a year fall into this category and have a <a href=\"https:\/\/propertyonion.com\/education\/2025-mortgage-rate-forecast-what-to-expect-in-the-year-ahead\/\" title=\"2025 Mortgage Rate Forecast: What to Expect in the Year Ahead\" target=\"_blank\" rel=\"noopener\" data-wpil-monitor-id=\"89908\">lower tax rate<\/a>. Long-term capital gains usually&nbsp;<a href=\"https:\/\/www.bankrate.com\/investing\/long-term-capital-gains-tax\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">see a tax between 0% and 15%<\/a>, whereas short-term gains could see a tax of up to 37%.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5_Consider_the_1031_Exchange\"><\/span><strong>5. Consider the 1031 Exchange<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Finding incentives is critical to getting the most out of your yearly taxes. One you should pay attention to is the 1031 exchange. This term refers to <a href=\"https:\/\/propertyonion.com\/education\/section-31-tax-deferred-exchange-an-investors-guide-to-benefits-and-advantages\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"section 1031 (opens in a new tab)\">section 1031<\/a> of the IRS code, letting real estate investors swap investment properties. After you sell a property, you can use the funds to purchase another while deferring the capital gains tax.<\/p>\n\n\n\n<p>The 1031 exchange can be helpful for real estate investors specializing in flipping properties. However, it comes with some caveats to be aware of. For example, a neutral party must control the money you make off a sale and hold it in escrow. Additionally, the IRS must approve of the properties exchanged because it expects them to be like-kind.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"6_Use_the_Qualified_Opportunity_Zone_Funds\"><\/span><strong>6. Use the Qualified Opportunity Zone Funds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Another opportunity for incentives is using <a href=\"https:\/\/propertyonion.com\/education\/qualified-opportunity-zone-fund-program\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"qualified opportunity zone (QOZ) funds (opens in a new tab)\">qualified opportunity zone (QOZ) funds<\/a>. QOZs have been around since 2018, following the federal government instituting the Tax Cuts and Jobs Act. This program incentivizes building in IRS-deemed economically distressed areas by giving tax incentives.&nbsp;<\/p>\n\n\n\n<p>You can take advantage of this incentive by using your capital gains to invest in QOZs. Thus, you can defer capital gains taxes if you reallocate the funds within 180 days. The deferment lasts until Dec. 31, 2026, or when you sell the property.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>Being a self-employed real estate investor means you have slightly different tax rules.<\/p>\n<\/blockquote>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"7_Contribute_to_a_Traditional_IRA\"><\/span><strong>7. Contribute to a Traditional IRA<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>You might not have a typical retirement plan if you\u2019re a self-employed real estate investor. If you haven\u2019t started saving, now is an excellent time because of the changes to IRA contributions. Those under 50 can\u00a0<a aria-label=\" (opens in a new tab)\" href=\"https:\/\/www.fidelity.com\/learning-center\/smart-money\/ira-contribution-limits\" target=\"_blank\" rel=\"noreferrer noopener\">contribute up to $6,500<\/a>\u00a0in 2024 and $7,000 in 2024. With a traditional IRA, you\u2019ll deduct your contributions and lower your taxable income.\u00a0<\/p>\n\n\n\n<p>Once you\u2019ve opened an IRA, you should&nbsp;<a href=\"https:\/\/www.risecommercialdistrict.com\/commercial-space\/blog\/five-ways-to-spend-smarter-during-inflation-pressures\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">focus on long-term assets<\/a>&nbsp;to ensure your savings beat inflation. While mutual funds and bonds carry some risk, they\u2019ve historically provided investors with good returns.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"8_Find_Energy-Efficient_Upgrades\"><\/span><strong>8. Find Energy-Efficient Upgrades<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Sustainability has become a sound environmental and business practice for real estate investors. The National Association of Realtors (NAR) says that&nbsp;<a href=\"https:\/\/www.nar.realtor\/blogs\/economists-outlook\/nar-2023-realtorsr-sustainability-report-residential\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">63% of its members emphasize<\/a>&nbsp;energy efficiency in their property listings. Buyers want it, so real estate professionals adhere to their calls.&nbsp;<\/p>\n\n\n\n<p>If you made energy-efficient upgrades to your properties, use these advantages on your tax filings. As of Jan. 1, 2023, the IRS allows a&nbsp;<a href=\"https:\/\/www.irs.gov\/credits-deductions\/energy-efficient-home-improvement-credit\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">tax credit of up to $3,200<\/a>&nbsp;for improvements made through 2032.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"9_Check_the_FICA_Rules\"><\/span><strong>9. Check the FICA Rules&nbsp;&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Being a self-employed real estate investor means you have slightly different tax rules. The IRS says you must&nbsp;<a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/self-employment-tax-social-security-and-medicare-taxes\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">pay 15.3% of your income<\/a>&nbsp;for Social Security and Medicare, but navigating what counts as income here is crucial.&nbsp;<\/p>\n\n\n\n<p>For example, you may own properties with tenants paying monthly rent. You\u2019ll file rental income on a Schedule E form, some of which may be FICA-exempt. You don\u2019t have to pay FICA taxes unless your property is a business.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"10_Plan_for_the_Future\"><\/span><strong>10. Plan for the Future<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Real estate investing can bring lucrative gains over the years. Retirement may be decades away, but it\u2019s never too early to plan for the future. Investors should know estate taxes and minimize liability for their heirs.<\/p>\n\n\n\n<p>For example, you can hand your assets to your spouse once you pass. This action exempts you from estate taxes unless they are not an American citizen.&nbsp;Additionally, married couples can give their children&nbsp;<a href=\"https:\/\/blog.taxact.com\/gift-tax-calculator-how-much-can-i-gift-tax-free\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">tax-free gifts of up to $17,000<\/a>&nbsp;annually. Real estate investors should consider this option if they have kids and numerous properties.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Making_Tax_Season_Easy\"><\/span><strong>Making Tax Season Easy<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Tax season can cause headaches for real estate investors, but it doesn\u2019t have to be complex. Savvy research and investing can make your tax liability lower and gains higher. Use these 10 tips to prepare your 2024 taxes.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The new year is here, so it\u2019s time to prepare for tax season. While taxes can be complicated, your filings provide numerous opportunities for deductions, credits, and other incentives. Smartly navigating your taxes can bring&hellip;<\/p>\n","protected":false},"author":56,"featured_media":6216,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[388,837,483,819,821,822,481,810,54,820],"class_list":["post-5717","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-articles","tag-1031-exchange","tag-837","tag-capital-gains","tag-deductions","tag-energy-efficient","tag-fica","tag-qualified-opportunity-zone-fund-program","tag-real-estate-investors","tag-taxes","tag-traditional-ira"],"_links":{"self":[{"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/posts\/5717","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/users\/56"}],"replies":[{"embeddable":true,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/comments?post=5717"}],"version-history":[{"count":7,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/posts\/5717\/revisions"}],"predecessor-version":[{"id":10126,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/posts\/5717\/revisions\/10126"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/media\/6216"}],"wp:attachment":[{"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/media?parent=5717"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/categories?post=5717"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/tags?post=5717"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}