Acquired your first property, added up your income and expenses, and now the part you've most looked forward to - filing your tax return. In seriousness, it doesn't need to be stressful, and we can keep it a smooth process.

 

Common services and discussion topics include the following.

 

o Worksheets are made available to help you with claiming all allowable expense deductions, and you can expect timely answers if you have questions filling them out. If you have your own worksheets or bookkeeping prepared, that works too! No need to fill out the same information twice.

 

o Depreciation calculation - this is the deduction you receive for a portion (about 2-4%) of the rental property's cost every year. Frequently when added with other deductible expenses, this can result in a rental property being tax-neutral, even while having a positive net cash flow. We'll talk about what you need to send for this, but more often than not it is just a copy of the property sale settlement statement. (Note, there is a way to accelerate this depreciation and pull a double digit percentage deduction into the first year. Figuring out whether that could benefit you is another part of our discussions and analysis, because it may be complicated by the passive loss limitation.)

 

o Passive loss limitation - a rental property can have a net positive cashflow and still run at a net loss for tax purposes. However, a rental is by default classified as a "passive activity" and losses cannot be deductible against other income from your employment, retirement, business, or stock portfolio income. That can be a rude surprise if you only find out in April, tax return in hand. There are exceptions to the treatment, depending on your other income and level of involvement, and planning during the year can help position you to maximize the allowable deduction.

 

o Disposal calculations - if you are considering selling, or donating, or performing a "like-kind exchange" to switch to a new property, we can discuss in advance. We'll walk through the requirements and calculate an estimate of the tax and net cash effects so that you can make more informed decisions.

 

Regarding tax preparation fees:

If your rental is reported on your personal tax returns, please see the "Individual Tax Filings" page under Services for more general information, including our process, policies, and minimum fees for individual tax filers.

 

If your rental property is in a partnership, the current minimum tax preparation fee for partnerships is $1,425 and that scales with the number of partners, rental properties, and other complexities.

 

Estimates of preparation fees are provided before work begins.

The words "real estate professional" and "material participation" have special meanings in tax, where an individual can both avoid the frustrations of the passive loss limitation and the Net Investment Income Tax. Because of these significant benefits, this area has seen a lot of attention from law makers and the IRS. Meeting the requirements, defined across laws, regulations, and court cases ... it can get very complicated. If you are considering a future as a real estate professional, it is in your best interest to talk to someone who knows how it all works.

 

Common services and discussion topics include the following.

 

o While DAV Consulting does not provide cost segregation services, you can expect to be reminded to pursue them. A cost segregation study is a type of property valuation where experts analyze your real estate and assign values to each component, sorting the structure into classifications for tax purposes. The benefit is vastly accelerating the depreciation deduction to give you a much larger deduction in the first year.

 

o Annual check-ins to make sure the real estate professional (REP) status is still being met. Common challenges that can jeopardize retaining REP status include, taking on non real-estate work, bringing in more active partners, hiring a property manager, and retirement from active management. With some planning, you may be able to retain your beneficial tax status even if your involvement is reduced or others are more involved than before.

 

o Section 199A Qualified Business Income Deduction - a relatively new deduction for businesses and rental properties with active owners. Assuming the property qualifies, the deduction offsets a portion of rental income with no special action required or expense to incur. However, if your taxable income before the deduction is over a certain threshold (as of 2025, $394,600 for joint filers and $197,300 for singles), then the deduction is limited by other factors including the amounts paid to employees, and the original cost of the property. Planning can help maximize this deduction.

 

o For new real estate professionals, take a look at the New Rental Property Owners section above as well.

 

Regarding tax preparation fees:

 

If your rental is reported on your personal tax returns, please see the "Individual Tax Filings" page under Services for more general information, including our process, policies, and minimum fees for individual tax filers.

 

If your rental property is in a partnership, the current minimum tax preparation fee for partnerships is $1,425 and that scales with the number of partners, rental properties, and other complexities.

 

Estimates of preparation fees are provided before work begins.

A real estate syndication is a partnership between investors who pool their resources to acquire real estate properties, typically led by a sponsor who oversees the deal. It allows individuals to invest in larger-scale projects that they might not be able to afford or manage on their own. The investors typically receive periodic payments, and after 3-10 years the underlying property is sold and investors receive a share of the proceeds.

 

Common services and discussion topics include the following.

 

o Syndications often intend to issue Schedule K-1s to their partners by a certain date, typically in March. As long as all final information needed to prepare the returns is sent to us through our portal by February 10th, we can meet that goal and avoid a need to file extensions.

 

o All Schedule K-1s are provided to the syndication in separate individual PDF packages in a sensible naming format, including federal and state forms, so that each can be delivered by the syndication to its partners more easily. These packages also include footnotes for common issues (Section 199A activities, state depreciation differences, etc.) to get ahead of and reduce investor questions.

 

o In a year with a substantial change, such as sale of the property, we can engage to prepare "estimate" K-1s for the syndication to share with the partners.

Regarding tax preparation fees:

The current minimum tax preparation fee for partnerships is $1,425 and that scales with the number of partners, rental properties, and other complexities with the average real estate investment partnership in a range of $2,000 - $5,000.

 

Estimates of preparation fees are provided before work begins.

We exercise standard and proactive practices to protect your information. As required under federal law, DAV Consulting, LLC maintains a written information security plan and adheres to safeguards such as the use of internal multi-factor authentication, encryption of data, and secure disposal of information. 

 

We do not use email to send you sensitive documents. We send you documents, and encourage you to send us documents through our portal. The portal is hosted by TaxDome, one of the most widely used providers for small and medium firms. See link below for TaxDome's privacy and security practices.

https://taxdome.com/security

Our clients are additionally protected through two-factor authorization on their portal login. (The first factor is your password, and the second factor is a code sent to your cell phone.) When you log in, the portal will request a 6-digit code which you can receive through an "authenticator" app on your cell phone. The most common authenticator apps, the Microsoft Authenticator and Google Authenticator, are available for both iOS and Android at no cost.

 

The cloud-based tax software we use is CCH Axcess, the same software used by the biggest accounting firms. The software is a product of Wolters Kluwer, and the link below provides more background and history on their company.

https://www.wolterskluwer.com/en/about-us

No one likes surprises that cost them money. As noted above, you can expect an estimate of the fee for preparing your tax returns in advance, so you can make an educated decision about proceeding with tax preparation.

 

If there is anything that comes up that could alter our fee estimate, you will be alerted promptly. This is a not a nickel-and-dime practice. If you receive a Form 1099 from a bank account you were not expecting, that won't impact your fees. However, additional investments, businesses, or increasing complexity in existing activities, could result in a higher tax preparation fee.

 

As with any business, you can assume our fees will rise in subsequent years in line with inflation and market conditions.