Commercial real estate accounting is not only restricted to tracking income and expenses. It is a specialized field that requires a robust understanding of real estate operations, regulatory compliance, and financial management. In this article, we will outline the role played by a CPA (Certified Public Accountant) in commercial real estate accounting in San Francisco.
The Advantages of Hiring a Commercial Real Estate CPA
Here are the top benefits of having a CPA in a real estate business team.
Reduce tax liability
One of the most important reasons to hire a real estate CPA is to reduce tax liabilities. While many real estate investors understand the tax return filing process, a knowledgeable real estate CPA can recommend tax methods to reduce or eliminate tax liability.
Optimize investments
A real estate CPA understands the nuances of state and federal tax laws, as well as how to use the rules to an investor's advantage. For example, a CPA may assist an investor in determining whether the cash or accrual method of accounting is more profitable for a corporation, as well as the benefits and drawbacks of adopting straight-line versus accelerated depreciation.
Structure the business
Many investors buy property as a sole proprietorship since it's the simplest option. However, doing something simple is not always the best option.
A real estate CPA knows the possible tax benefits of owning rental property through a legal structure such as an LLC or S company, allowing an investor to make more informed decisions about how to build a real estate business.
Track changes to the real estate tax code
The tax system in the United States has become more intricate over time. According to the Tax Foundation, the length of the tax code has increased from a few pages in the 1940s to more than 70,000 pages now.
Even tiny changes here and there might have a substantial impact on tax liabilities. A professional real estate CPA will stay up to date on tax code changes to assist an investor avoid paying unnecessary taxes or breaking the law.
Offer advice on business decisions
A real estate CPA can identify long-term real estate cycles and evolving trends that an investor focused on running a business may miss.
For instance, the Biden administration advocated boosting capital gains taxes. Some investors panicked and sold before the year's end to lock in gains at a minimal tax rate, losing out on future property appreciation.
While the capital gains tax law remains unaltered, a competent CPA can assist an investor in making informed buying and selling decisions based on objective facts.
Assist with scaling up and growing a real estate firm
A real estate investor looking to create wealth over time may benefit from having a real estate CPA on their team.
A commercial real estate CPA understands the numerous tax implications of purchasing, owning, and selling rental property as an investment portfolio increases. Receiving unbiased expert counsel from a CPA while developing an investment strategy may assist an investor in creating wealth. This may be passed down from one generation to the next without incurring tax issues.
Conclusion
Having a CPA on a real estate team might help an investor reduce tax liability and optimize investments. A real estate CPA in San Francisco who specializes in real estate may be more prepared to assist an investor in staying on top of tax law changes. They also help in claiming every conceivable deduction and developing a tax-advantaged real estate portfolio for long-term growth.
