3 Year End Real Estate Tax Tips

Performance Property Real Estate Question

Q: 3 Year End Real Estate Tax Tips

A: Year End Real Estate Tax Tip #1. Prepay quarterly estimated state tax payments.

Disclaimer: I am not an accountant

Consider paying your fourth-quarter estimated state income taxes or any outstanding state income taxes by the end of December. Your payments will be tax deductible for this tax year if you’re not subject to the alternative minimum tax (AMT).

Year End Real Estate Tax Tip #2. Contribute the maximum amount of $ allowed to your retirement account

There are very few investments better than tax-deferred retirement accounts because they compound your money over time free of taxes.

The sooner you get your money into the retirement account, the sooner it has the potential to start to grow tax-deferred. Making deductible contributions also reduces your taxable income and therefore the taxes you have to pay for the year.

Year End Real Estate Tip #3. Defer your income

Income is taxed in the year it is received – so it may be advantageous to delay paying tax until tomorrow rather than paying it today particularly if you expect to be in the same or lower tax bracket next year. Your situation may vary depending on if you are an employee or if you are self-employed.

If you are an employee, for tax purposes, you may want to consider deferring a year-end bonus until next year. If you are self-employed, consider delaying billings until late in the year to ensure that you won’t receive payment until next year which is a new tax year. Lowering your taxable income saves you money because it lowers the amount of tax you owe.