Tax Time with Mitch Hagen
That time of year when you’re looking at your tax bill and you probably have plenty of thoughts, emotions, and words…most of them are probably not fit to share on this blog.
If you find that to be the case, you’re also probably wondering what else you could do or could have done to be in a better position. Specifically, those in real estate, consider how depreciation can change the equation in the short-term and your long-term family wealth generation.
Below is one question to consider*.
1. What is the latest date you can determine your depreciation on a rental property for the Calendar Year 2021 Income Tax Return:
a. Situation: You buy a rental property in November 2021, which has tenants in place. You know there is depreciation generated from your rental property, but you don’t know where to start on calculating this, so you put it off. It’s now April 2022 and tax returns are due. You extend your tax return to buy you more time with the feeling that you still don’t know what your depreciation is for your 2021 tax return, and you think it is too late to do anything about it…
b. Insight: You do NOT need to determine your 2021 depreciation by 12/31/2021. You also do NOT need to determine your depreciation by 4/15. You need it by the date you file, which could be as late as 10/15/2022 for your 2021 tax return. In some cases, you may even amend a previously filed tax return and adjust your depreciation determinations. Be sure to keep your tax advisor updated before, during, and after you’ve purchased your rental property so that they work proactively for you on these and other matters.
We are not tax advisors, but we have seen many different scenarios and work frequently and regularly with our advisors (tax, legal, banking, and other team members) on our real estate deals.
We would be happy to connect further on some of our experiences and appreciate your feedback on some of your experiences on the above or other topics. Please reach out or comment below to continue the conversation!
We’ve found the real estate community to be a very inclusive and informative group that we want to continue as well. See below for our comments section and our contact information. Thanks!
– Mitch Hagen, Director of Finance
OBO LeavenWealth (and related businesses)
*This is not tax or legal advice. We are not obligated to update this post with potential updates. Consult your tax advisor regarding the below and other options that may be available to you before taking any tax positions.