A review of the TOP TEN YEAR-END TAX PLANNING CHECKLIST.
A review of the TOP TEN YEAR-END TAX PLANNING CHECKLIST. A lot has happened this year in the real estate market and the general economy. It impacts the portfolio of many Real Estate Investors – the value of our assets, how we want to invest in the coming years, and even our retirement planning. It also impacts 2025 tax issues that will be confronting us in the upcoming tax filing season.
Tax preparation for the April 15th tax deadline is merely tax compliance as opposed to voluntary tax reduction planning. December 31st is the true tax savings deadline. Some of the best tax-reduction moves really need to be done by mid-November or early December. They often take some planning. Getting a head start now could make you a lot happier in April, giving you a bigger refund or a smaller check to write to Uncle Sam.
You either pay the IRS, pay a tax preparer, or pay a qualified CPA to come up with some tax reduction strategies.
1. If you own a business, do you have an EIN, an operating agreement, and a separate bank account? IRS audits on small businesses, especially real estate businesses, have increased.
2. Have you recorded all the income and expenses related to the business on the business bank account? This is a huge audit item for 2025.
3. If you own investment property that was foreclosed or sold as a short sale, have you considered the impact of the cancellation of debt income on your individual income taxes? Have you calculated the loss of sales of investment property?
4. If you generated any kind of active real estate income, have you considered restructuring your business to minimize the impact of self-employment taxes?
5. If you have significant real estate education expenses, have you registered a business to minimize your audit exposure on deducting these expenses?
6. If you have significant business expenses and already have a registered business, have you considered converting to a multi-member LLC to avoid an audit flag?
7. Have you considered the impact of wasted deductions?
8. Do you understand what your tax filing requirements are for the states where your business is registered, such as annual filing, personal property tax returns, etc.?
9. If you own investment property, have you considered conducting a cost-segregation study to increase your depreciation expense?
10. If you bought or sold property in 2025, have you considered the impact of capital gains, adding rehab expenses to the basis of the property, and whether the holding costs (mortgage interest, taxes, and insurance) are deductible in 2025?
Advanced:
1. Oil & Gas: Can use Drilling Costs Tax Deductions to offset:
- • W-2 Income
- • Capital Gains
- • Investment used for upfront tax deduction will come back to the investor in 2-4 years, plus interest.
2. 1031 to a Large Established Investment Property: 1031 into a large already set-up investment property easily. Get excellent monthly cash flow without the headache of being a landlord.
3. QOZF (Qualified Opportunity Zone Fund) paired with an Oil & Gas IDC.
- • Defer Capital Gains
- • Get Cash Flow Year 1 at 4%, Years 2-10 at 6%
- • When tax is due in year 7, use discounting, depletion allowance, drilling costs, depreciation, AND the 10% step-up in Year 6 to significantly cut down the taxes owed to around 60-70%
- • Save up cash flow to pay for taxes in Year 7, and end up with a net positive
- • ROI: 1.4X-1.8X on investment only
4. Charitable Structure: Use a charitable structure to take advantage of using an itemized charitable deduction to offset taxes owed.
2025 UPDATE
We’ve sold out of three strategies for 2025, but still have some great strategies ready to go for a 1040:
1. Gas & Oil:
- a. Offset W-2 income, capital gains, S-Corp profits
- b. Minimum got lowered to $5,000 from $25,000
- c. Get dollar-for-dollar deduction on tax return (1040)
- d. Get investment back in 3-4 years
- e. Conservative ROI: 1.51x
- f.Averages 10-13%
2. LCD (Leveraged Charitable Deduction)
- a. Max out itemized charitable deduction
- b. Max is 30% of AGI (Adjusted Gross Income)
- c. 4x & 5x option on contribution. Example 4x: $30,000 contribution, gets a $120,000 itemized charitable deduction
- d. Minimum is $30,000
3. SOP (Structured Ownership Program):
- a. Great to offset Long Term Capital Gains or Ordinary Income, not including wages (S-Corp profits, rental income, farm income)
- b. Minimum Long Term Capital Gain is $1 million
- c. Minimum Ordinary Income is $800k
- d. Cash Flows 3-7% per year
- e. Can offset all LTCGs (10x on capital contribution) or Ordinary Income 8x (Capital Contribution), using Section 469 and other parts of the tax code.
- f.Has Audit Protection, has been audited 4 times with No Change. Been around since 1999.
Solar Strategy will be available again in January 2025. Can carry back up to 3 years (2022, 2023, 2024) with the Investment Tax Credit. Tax Credit got locked in at 30% for 10 years. There are four 10% kickers that can be added onto the 30%, if the project qualifies.
Estate Planning:
1. Make Sure Your Estate Planning is Up To Date:
- A. Will or Trusts – Are you fiduciaries, trustees, and beneficiaries still the same?
- B. Health Care Directives – Does this include the HIPAA rules
- C. Financial Power of Attorney – Is this up to date?
2. Check Your Beneficiary Designations: on any life insurance, retirement accounts, bank accounts, vehicles, or real estate
3. Review Car and Homeowners Insurance Policies: Analyze the coverage you currently have for your home and car to see if you are properly covered and to see if there are any additional savings available to you.
A review Year-End Charitable Contribution Checklist.
A lot has happened this year in the real estate market and the general economy. It impacts the portfolio of many Real Estate Investors – the value of our assets, how we want to invest in the coming years, and even our retirement planning. It also impacts 2025 tax issues that will be confronting us in the upcoming tax filing season.
Tax preparation for the April 15th tax deadline is merely tax compliance as opposed to voluntary tax reduction planning. December 31st is the true tax savings deadline. Some of the best tax-reduction moves really need to be done by mid-November or early December. They often take some planning. Getting a head start now could make you a lot happier in April, giving you a bigger refund or a smaller check to write to Uncle Sam.
You either pay the IRS, pay a tax preparer, or pay a qualified CPA to come up with some tax reduction strategies.
With the holiday season upon us, we should think about charitable giving. The tax benefits associated with charitable giving could potentially enhance your ability to give and should be considered as part of your year-end tax planning.
Tax deduction for charitable gifts
If you itemize deductions on your federal income tax return, you can generally deduct your gifts to qualified charities. This may also help potentially increase your gift. However, keep in mind that the amount of your deduction may be limited to certain percentages of your adjusted gross income (AGI). For example, your deduction for gifts of cash to public charities is generally limited to 60% of your AGI for the year, and other charity gifts are typically limited to 30% or 20% of your AGI. Charitable deductions that exceed the AGI limits may generally be carried over and deducted over the next five years, subject to the income percentage limits in those years.
WAYS TO DONATE
Cash – Giving cash is the most straightforward way to donate. Typically, your deduction equals the amount of your gift, subtracting the value of any goods or services you get in return. Always request a receipt for your contribution when giving in cash, no matter the amount; alternatively, be prepared to show supporting financial documentation like a bank statement or canceled check. 5
Donor Advised Funds (DAFs) – This involves gifting cash or securities to a nonprofit organization through a giving account. You’re allowed to make recommendations as to how your money is allocated, though the recipient is not legally obligated to oblige (which is why it’s called “donor advised” and not “donor directed”). You receive the maximum tax benefit at the time of your donation and can arrange for the account to continue paying out after your death. This is a starting point for creating a legacy account. Three types of DAF Accounts we assist with
. 1) DAF OVER 25K – Funds are invested to grow over time. You can set up this account individually for your benefit. It’s like setting up an investment account for your charitable giving. Fees range from $750-$1,500 to set up.
2) DAF UNDER 25K – Funds are invested to grow over time. You can pool your funds with other donors and contribute to a DAF as an entity. It’s like setting up an investment account joint venture for your charitable giving. Fees range from $300-$1,000 to set up.
3) DIRECTED CONTRIBUTIONS: Contributions to Charities/Grants to Individuals made within 1 year. This can be a starting point to eventually set up a DAF account. Fees range from $250-$1,500 to set up.
Learn more about Advanced End of Year Tax Strategies with our FREE handout at Advanced Tax Strategies
