Year-Round Tax Planning for Real Estate Owners

“Most high-value decisions have to be made before the end of the year — if you’re only thinking about taxes after the year’s already done, you’ve probably missed out on a significant amount of opportunities and you don’t even know it.” — Daniel Roccanti, CPA

In this episode of Your CPA’s Take on Real Estate, Daniel Roccanti, breaks down why reactive tax filing costs real estate owners more than they realize and what a proactive, year-round approach actually looks like in practice.

From 1031 exchange alternatives to bookkeeping, audit risk and year-end property reviews, this conversation covers the tax moves owners should be making long before April arrives.

Resources:

• Real Estate Services | James Moore
• Your CPA’s Take on Real Estate Series
• Watch the Full Episode

Full Transcript

[00:02] Host: Hi everyone and welcome to the JMCO channel. Today I am here with Daniel Roccanti. Hi Daniel, how are you?

[00:06] Daniel Roccanti: Hi Faith.

[00:07] Host: All right, so let’s get right into it. We have a lot of questions to cover. Today’s topic is tax planning beyond April, year-round strategies for real estate owners.

[00:23] Host: The first question is, why is reactive tax filing costing real estate owners more than they realize?

[00:28] Daniel Roccanti: I think a lot of taxpayers only think about taxes one time a year. It’s like, I have to file a tax return. That kind of mindset is really limiting your opportunities. The real loss is an opportunity loss, because most high-value decisions have to be made before the end of the year. It takes time. So if you’re only thinking about taxes and what you can do after the year’s already done, you’ve probably missed out on a significant amount of opportunities and you don’t even know it. It’s really important that you understand you need to be thinking about tax strategy year-round, not just during tax filing season. Now that tax filing season is over, this is a great time to start thinking about 2026 and beyond.

[01:17] Host: Right, exactly. So are there strong alternatives to the 1031 exchange that owners should consider?

[01:22] Daniel Roccanti: The 1031 exchange is very powerful. Most people in real estate already know what that is. I can basically sell my real estate and buy a new piece of real estate tax-free, deferring that gain. But it’s not always the best answer. There are very strict guidelines around it. One alternative is technically still a 1031 exchange, but you can exchange into a DST, a Delaware Statutory Trust. Instead of owning and managing the property yourself, it’s basically owning a portion of real estate that somebody else manages. It’s a great option for investors who want to switch from active to passive real estate investing, especially if you’re getting up there in age, don’t want to manage it anymore, and are starting to think about the next generation. There are also installment sales. It’s not going to defer the gain forever, but you don’t have to pay the whole thing at once. You sell on installment and get paid out over time, like owner financing. Qualified opportunity zones are back as well. If you’ve seen the new tax bill, this is going to be significant starting in 2027. Opportunity zones 2.0 is what they’re calling it. The old opportunity zones phase out and this new version starts, with a lot of the same benefits plus some new ones. And one that gets overlooked a lot is what we call a Section 721 or UPREIT contribution. You can contribute property into another partnership tax-free. So if you don’t want to sell and buy a new property on your own, you can find a syndication or real estate fund and contribute your property in exchange for ownership in that fund, a tax-free contribution into a large real estate portfolio.

[03:41] Host: Oh, that’s amazing. I think you just taught me things. So, how are SALT limitations impacting real estate investors right now?

[03:50] Daniel Roccanti: SALT limitations are very geographical. If you’re in New York or California where you have high state and local taxes, you feel it more. In Florida, we don’t see it as much. Basically what happened was the cap got increased from $10,000 to potentially $40,000, but it starts phasing out pretty quickly for high income earners, going back to that $10,000 limit. There are strategies like pass-through entity tax elections on the business side to work around it. At the end of the day, investors are looking for the most profitable places, and the places with the highest SALT taxes right now are not the most profitable. There’s also rent control and other factors. It really comes back to whether that state is going to be real estate and investor-friendly, and what the profits look like in that area. Even within Florida, what’s happening in Miami is completely different from what’s happening in Jacksonville.

[05:22] Host: I’ve been seeing the shift from Miami to Boca to Delray, and now we’re seeing Boynton. It’s slowly making its way up the state. Hope Sound, Port St. Lucie, real estate is definitely growing faster here than a lot of people realized, which is exciting for investors.

[05:43] Daniel Roccanti: It is. And if you’re down in the South Florida area, Miami is already packed to the Everglades and the beaches. You can only go up vertically or you have to start expanding into other areas.

[06:06] Host: Yeah, absolutely. Where do you see owners missing proactive planning opportunities?

[06:10] Daniel Roccanti: What I think a lot of owners are missing is they expect some exotic opportunity they’ve never heard of. Most misses are just common, basic planning, but it takes time. People get over-glorified about it, thinking someone is going to mention some random IRS tax code and it’s going to save them a bunch of money. That’s not really how it is. There’s a bunch of tools in the tool bag, and you need to understand what these strategies do and how they affect your situation. A lot of times, all these tax strategies and savings are not saving you money because the government wants you to pay less taxes. There’s a reason behind every incentive. What are they trying to get? Is that something that matches with what you’re trying to do? A lot of owners are just missing opportunities because they’re expecting some grand thing where you come in and save a bunch of taxes immediately. It’s often not glamorous at all. It’s about planning years in advance. Even something as simple as this: this year you’re going to have a very low tax year, so we actually push more things into future years when you sell properties and will have a much higher tax rate. Just playing with tax rates from 20% to 37%, that 17% difference, just by playing with timing, has saved people millions of dollars.

[07:59] Host: Wow, that’s incredible. So the next question is, how can tax strategy reduce overall risk, not just liability?

[08:07] Daniel Roccanti: When people think taxes, they just think tax liability. How much am I going to pay and how can I make that lower. But you have to think about it from a lot of different angles. One is audit risk. It’s very expensive to get audited, very time consuming, and it can last many years. You really want to make sure you’re lowering your audit risk, and that comes from understanding what the IRS is looking at. You might not be intentionally doing anything wrong, but if you’re working with an experienced preparer, we know exactly what a tax return should look like, what should be reported, and what the red flags are so you don’t accidentally get audited because of something on your return. And when you do get audited, they’re going to start looking at everything. There’s also legal risk. You want to make sure you’re properly filing your returns, keeping proper records, maintaining clean books and depreciation schedules, and recording everything correctly. All of this affects your overall tax liability and it gets overlooked. Bookkeeping is the biggest difference between people saving a lot of taxes and people paying a lot of taxes, and they don’t even know it because they don’t know how much they’re saving. Here’s an example. Say I go to a store and want to buy something. They’re going to sell it to me for $100, but it’s 25% off, so I’m only paying $75. I got a good deal. I saved $25. I go to a different store selling the same item for $75 with no discount. I got the same value, but I think I got more because I got a 25% discount. That’s how normal human thinking works. With bookkeeping, you don’t realize how much money you’re saving because you never knew you were saving in the first place.

[10:05] Host: How many messes have you had to clean up?

[10:08] Daniel Roccanti: Bookkeeping is always one of them. It’s always painful. When you have clean books, the tax return goes well, you actually save more on tax liability and preparation fees, and there’s less risk around audits and legal issues. Even if you get sued, having clean books makes everything smoother. Messy books feel like you’re saving a dollar today for potentially spending a lot more money down the road.

[10:44] Host: Absolutely. What should owners be doing mid-year to stay ahead?

[10:48] Daniel Roccanti: Mid-year is actually prime tax planning season. Tax season is when everyone, CPAs, clients, taxpayers, is focused on getting returns done. Mid-year is usually the best combination of having last year fully closed so you can focus on this year, and still having enough time to act on things. A lot of tax strategies can’t just happen overnight. It takes time to understand them. So now is a good time to analyze your business. If I want to qualify for real estate professional status, I need to truly understand what that means for tax purposes. Do I have the hours? Do I have the logs? A lot of times what I see is someone who’s heard about real estate professional status, bought a rental property, and wants to claim it right away. I have to slow them down and ask whether they actually did the required activity. They’ll come up with a bunch of things, some of it may be eligible, some of it’s not, and they’re usually falling short. I have to be the one to tell them they’re too late and can’t claim it this year. Next year, we have to plan properly. Buying one or two rental properties might not be enough to qualify. You might need to buy more if that’s really what you want, but you have to understand the time commitment and the lifestyle commitment. It’s not a one-time claim. Every year you need to make sure you’re getting the required eligible hours.

[12:37] Host: Yeah. And I think the thing to remember is that about 80% of what’s on TikTok is made by AI. You could be listening to someone who seems like an expert CPA in real estate, and that person is not real. Working with a real person and an expert will save you in the long run.

[13:05] Daniel Roccanti: Absolutely. With social media, it’s a mixed bag. There’s actually good advice out there, you just don’t know when you’re getting good advice and when you’re getting bad advice. That’s the biggest problem with information today. It’s just hard to figure out what’s real and what’s not. When that happens, you have to fact-check everything. If you don’t know something or it’s complicated, I always recommend checking it with your CPA before you do anything.

[13:42] Host: 100%. Okay, last question. What’s one move real estate owners should make before year-end?

[13:48] Daniel Roccanti: The biggest thing is to analyze all your properties. Before year-end, look at every property and ask yourself, “Would I buy this property today if I could start over?” Is it cash flowing? Is it getting the return I want? Really understand where each property stands today and decide whether you like the investment or whether you should start looking at something different. You have enough time to act. Real estate moves slowly, but half a year is enough to start the process. The best investors have an exit strategy before they’ve ever purchased the property. They understand how they’re going to buy it, how they’re going to operate it, and how they’re going to exit it. Life throws changes at you and you have to adjust, but as long as you have a plan, you’re ahead. When you’re reviewing your properties, that’s when you can really go deeper with your CPA on tax strategies, bonus depreciation, cost segregations, 1031 exchanges, or even more complex strategies like the historic rehabilitation tax credit. Always think about return on investment, but also return on hassle. Make sure you understand what the cost is and what the savings are to see if it really fits your strategy and your lifestyle.

[16:02] Host: Solid advice. It was so great to talk to you today, Daniel. Thanks for everything. We will have you back on May 28th.

[16:10] Daniel Roccanti: Looking forward to it. Thank you.

Watch the Full Episode on YouTube

Start Planning Before the Year Gets Away From You

Year-round tax planning isn’t about finding exotic strategies. It’s about having enough time to use the ones that actually work. If you’re a real estate owner who wants to plan ahead, connect with a James Moore professional to start the conversation now.

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