Tax on Rental Income

Owning property in different states sounds like the ultimate power move. Diversified investments, multiple income streams, maybe even a vacation home you can write off. But what many real estate investors don’t realize is that multi-state property ownership comes with complicated tax rules that, if handled incorrectly, can drain your profits fast.

Think you’re off the hook because you moved to a state with no income tax? Not so fast. State tax laws don’t care where you want to live; they care where you make money. If you own property across state lines and don’t have a strategy, you could be overpaying taxes, facing double taxation, or even triggering an IRS audit.

Let’s break down what you need to know to protect your money and avoid unnecessary tax bills.

The Tax Traps of Owning Property in Multiple States

1. State Income Tax: Where You Live vs. Where You Owe

Just because you live in Texas (zero state income tax) doesn’t mean you’re in the clear. If you own rental property in California, New York, or any other high-tax state, those states can still tax your rental income.

What that means for you:

• Rental income is taxed in the state where the property is located.
• Moving to a no-tax state won’t eliminate your tax bill if your rental income comes from a taxed state.
• Some states even require non-residents to file tax returns, adding another layer of complexity.

Example:
 You move from California to Texas, thinking you’ve escaped that 13.3% California state tax. But your rental property in Los Angeles? Still subject to California’s tax laws.

A CPA in Austin, Texas can help you determine where you actually owe taxes and how to structure your income to minimize your liability.

2. Property Taxes: Different States, Different Rules

Owning property in multiple states means multiple property tax rates, different assessment rules, and potential tax penalties if you don’t structure things correctly.

What to watch out for:

• Some states increase property tax rates for non-resident owners.
• You could lose out on tax breaks (like homestead exemptions) if you claim residency elsewhere.
• States with high property taxes like New Jersey, Illinois, and Connecticut can eat into your rental profits fast.

Example:
 You live in Texas (low property taxes) but own an investment property in New Jersey (one of the highest property tax rates in the country). If you don’t plan correctly, you could end up paying thousands more than necessary just in property taxes.

An Austin tax accountant can review your property tax exposure across states and help you find legal ways to reduce your overall tax burden.

3. Residency Audits: Are You Really a Resident of That No-Tax State?

If you move from a high-tax state to a no-tax state, don’t be surprised if your former state tries to claim you as a resident for tax purposes.

Red flags that can trigger a residency audit:

• You still own property in the high-tax state.
• You spend a significant amount of time in that state.
• You maintain business interests, voter registration, or a driver’s license in the old state.

Example:
 You move from New York to Texas, but you still own an apartment in Manhattan, frequently travel back for business, and keep a New York driver’s license. New York might still claim you as a tax resident—meaning you’re on the hook for New York state taxes.

A tax advisor in Austin can help you document your residency properly to avoid getting caught in a tax battle with your former state.

4. How You Own Your Property Can Impact Your Tax Bill

The way your rental properties are structured legally can determine how much tax you pay and where you pay it.

Consider these ownership structures:

• LLCs – Some states charge hefty LLC franchise taxes, while others don’t tax LLCs at all. Choosing the right state to form your LLC
• Trusts – Can be useful for estate planning and tax reduction
• Personal Ownership vs. Business Entities – Depending on the state, shifting ownership under an entity based in a low-tax state could reduce tax exposure.

An Austin small business accountant can help you structure your property ownership for tax efficiency while keeping everything fully compliant.

If You Own Property in Multiple States, Your Tax Situation Is More Complicated Than You Think

You wouldn’t make a major real estate investment without a solid financial plan so why would you ignore the tax side of things? Without the right strategy, you could overpay in taxes, face unexpected penalties, or trigger a costly residency audit.

At Insogna CPA, we specialize in multi-state tax planning for real estate investors, helping you:
 ✔ Minimize state income tax liability
 ✔ Reduce property tax burdens across multiple states
 ✔ Avoid IRS and state residency audits
 ✔ Optimize your real estate portfolio for long-term tax savings

If you own property in multiple states, your tax situation is more complex than you think. Let’s strategize together. Book a call today.

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Renting Out a Property? Here’s How to Keep More of Your Money

So, you’ve decided to rent out a property. Great move. Whether you’re turning your old home into an income stream or expanding your real estate portfolio, there’s real money to be made. But here’s the catch: if you don’t handle your taxes right, you could end up paying way more than you need to or worse, trigger an IRS headache.

Many first-time landlords assume that rental income is just like any other income and that tax software will handle the details. That assumption? It’s costing investors thousands every year.

The good news? With the right strategy, you can legally minimize your tax bill, capture deductions you didn’t know existed, and avoid common mistakes that trip up new landlords. Let’s break it down.

The Mistakes That Cost Landlords Thousands

1. Thinking Your Taxes Stay the Same When You Turn a Home Into a Rental

If you’re renting out a property that was once your primary home, your tax situation changes immediately.

• Your rental income is taxable. Even if tenants pay in cash, you need to report it.
• You need to track depreciation. The second your property becomes a rental, the IRS expects you to start depreciating it but if you don’t do this correctly, you could lose out on tax savings.
• Selling later gets complicated. If you sell a rental after living in it, you may lose your capital gains tax exclusion, unless you plan ahead.

A CPA in Austin, Texas can help structure the transition so you don’t lose out on deductions or get hit with an unexpected tax bill down the road.

2. Missing Out on Hidden Tax Deductions

Most landlords miss thousands in deductions simply because they don’t know what to track. Here are some of the most overlooked write-offs:

• Depreciation – A major tax advantage that lets you deduct the property’s value over time.
• Home office expenses – If you manage your rental business from home, part of your mortgage, internet, and utilities could be deductible.
• Travel & mileage – Driving to check on your rental, meeting with tenants, or making repairs? Those miles are deductible.
• Repairs vs. improvements – Quick fix? Deduct it. Major upgrade? Depreciate it. Get this wrong, and you could be leaving money on the table.
• Professional services – If you hire a small business CPA in Austin, a property manager, or an attorney, those fees are fully deductible.

The bottom line? If you’re relying on DIY tax software, you’re probably missing deductions. A tax advisor in Austin who understands real estate can help you keep more of your hard-earned rental income.

3. Assuming Tax Software Will Catch Everything

You know what tax software does well? Basic filings. You know what it doesn’t do? Plan ahead to save you money.

Most rental property tax mistakes happen because software only looks at last year’s numbers. It doesn’t:

• Identify strategic tax moves like cost segregation or 1031 exchanges.
• Optimize your depreciation schedule to maximize your deductions.
• Ensure you’re structuring rental income correctly for tax efficiency.

That’s where an Austin accounting firm comes in. A real estate-savvy CPA firm in Austin, Texas can make sure you’re not just filing taxes but planning for tax savings.

How to Get Ahead of Rental Property Taxes

If you want to stop overpaying and start keeping more of your rental income, here’s what you need to do:

 ✔ Work with an expert – A CPA firm in Austin, Texas can help you structure your rental properly from day one.
 ✔ Track every deductible expense – Travel, depreciation, repairs; if you’re not tracking, you’re losing money.
 ✔ Plan for the long term – If you’re planning to sell, buy another property, or expand your portfolio, a tax strategy now can save you thousands later.

Renting Out a Property? Let’s Make Sure You’re Set Up for Success.

Owning a rental property comes with major tax benefits but only if you know how to use them. The last thing you want is to realize you overpaid in taxes or made a mistake that leads to an IRS audit.

At Insogna CPA, we help landlords and real estate investors maximize deductions, avoid tax pitfalls, and keep more rental income in their pockets.

Thinking about renting out your property? Let’s make sure you’re set up for success. Book a tax strategy session today...

Owning a rental property is a great way to build wealth, but before you start collecting rent, there’s a lot more to think about than just finding tenants. Miss a key financial step, and your “passive income” could turn into a tax or cash flow nightmare.

Many first-time landlords assume renting out a property is as simple as handing over the keys and watching the money roll in. But without the right financial plan, you could overpay in taxes, miss valuable deductions, or struggle with cash flow.

Let’s walk through four must-do financial steps to make sure your rental property is profitable, tax-efficient, and stress-free.

1. Update Your Insurance—Because Homeowner’s Coverage Won’t Cut It

If you’re renting out a property you once lived in, here’s something you might not know: your homeowner’s insurance won’t protect you anymore.

What You Need Instead:

• Landlord Insurance – Covers property damage, liability claims, and lost rental income if your property becomes unlivable.
• Umbrella Policy – Adds extra liability coverage in case of legal issues.
• Require Renter’s Insurance – Tenants should carry their own renter’s insurance to protect their belongings.

Tax Benefit:

Good news! Your landlord insurance is fully deductible. Many new landlords miss this tax write-off, but a real estate-savvy CPA in Austin, Texas can make sure you don’t.

2. Understand Depreciation & Tax Deductions—Because the IRS Wants Its Cut

If you’re not leveraging depreciation and rental deductions, you’re leaving thousands of dollars on the table.

Key Tax-Saving Strategies:

 ✔ Depreciation – The IRS lets you write off the cost of your rental property over 27.5 years, lowering your taxable income.
 ✔ Operating Expenses – Property taxes, insurance, repairs, and utilities are fully deductible.
 ✔ Home Office & Mileage – If you manage your rental from home, part of your mortgage, internet, and travel expenses could be deducted.

Why It Matters:

Most tax software misses these advanced deductions. A seasoned Austin tax accountant can ensure you’re maximizing your tax savings and staying IRS-compliant.

3. Decide Whether to Self-Manage or Hire a Property Manager—Because Time Is Money

Managing a rental property isn’t just about collecting rent. It’s also about tenant screening, handling maintenance, chasing payments, and bookkeeping.

What to Consider:

 ✔ Self-Management – More control, but more work dealing with tenants, maintenance, and rent collection.
 ✔ Hiring a Property Manager – Less stress, but property management fees typically range from 8-12% of monthly rent.
 ✔ Tax Benefits – The good news? Property management fees are 100% tax-deductible.

Pro Tip:

If you’re unsure which option makes the most sense, an Austin small business accountant can help you run the numbers and decide what’s best for your bottom line.

4. Plan for Taxes & Cash Flow—Because Surprise Tax Bills Are the Worst

Rental income isn’t just extra cash. It comes with tax implications. If you don’t plan ahead, you could end up owing more than expected when tax season hits.

How to Keep More of Your Money:

✔ Estimate Your Tax Bill – Rental income is taxable, but deductions like depreciation and expenses help offset it.
 ✔ Separate Your Finances – Open a dedicated bank account for rent payments and rental expenses to simplify tax filing.
 ✔ Work With a CPA – A tax advisor in Austin can help you develop a cash flow strategy that minimizes taxes and keeps your rental business profitable.

New to Rental Property Ownership? Let’s Maximize Your Tax Benefits.

Owning a rental property is a great investment, but only if you structure it correctly from day one. The right tax strategy can save you thousands every year but one misstep could cost you more than you expect.

At Insogna CPA, we specialize in real estate tax planning, helping first-time landlords and experienced investors maximize deductions, stay compliant, and keep more of their rental income.

Let’s make sure you’re set up for success. Book a tax planning session today...

You got into real estate to build wealth, not to hand over more than necessary to the IRS. But here’s the thing: many rental property owners overpay in taxes every year simply because they don’t know what they can deduct.

The tax code isn’t designed to be obvious, and tax software? It’s built for the masses, not for landlords looking to maximize their deductions. If you’re not working with an Austin Texas CPA who understands real estate, you could be leaving thousands on the table.

Here are seven often-overlooked tax deductions that every rental property owner should be claiming.

1. Depreciation – The Easiest Way to Lower Your Taxable Income

If you’re not taking full advantage of depreciation, you’re doing real estate taxes wrong.

Why It Matters:

• The IRS lets you write off a portion of your rental property’s value every year because, on paper, it’s “wearing down.”
• Residential rentals depreciate over 5 years, which means thousands in annual deductions.
• A cost segregation study can accelerate depreciation on things like appliances, flooring, and landscaping, allowing you to deduct more upfront.

How to Maximize It:

A real estate-savvy Austin tax accountant can ensure you’re structuring depreciation correctly and strategically to lower your taxable income.

2. Home Office Deduction – Managing Your Rentals Can Work in Your Favor

If you manage your properties from home, you might qualify for a home office deduction.

What You Can Deduct:

• A portion of your rent or mortgage interest
• Utilities like electricity and internet
• Office furniture, business software, and computers

What You Need to Know:

Your home office must be exclusively used for managing your rental properties. No, working from the kitchen table doesn’t count.

If you’re unsure how to structure this, an Austin small business accountant can help make sure you’re maximizing deductions without raising red flags.

3. Travel & Mileage – Because Property Visits Add Up

Think about how often you drive to your rental property—whether it’s for repairs, tenant meetings, or inspections. Those miles are deductible.

What You Can Deduct:

• 67 cents per mile (IRS rate for 2024)
• Flights, hotels, and rental cars for out-of-state property visits
• Meals if you travel overnight for rental-related purposes

Pro Tip:

The IRS loves documentation so track your mileage and receipts carefully. A tax advisor in Austin can help ensure you’re claiming these deductions the right way.

4. Utility & Maintenance Costs – Stop Paying More Than You Need To

If you cover utilities for your rental property, those expenses are fully deductible.

Examples of Deductible Costs:

 ✔ Electricity, gas, and water
 ✔ Trash collection
 ✔ Internet and cable (if included in the lease)

Regular maintenance expenses like HVAC servicing, pest control, and landscaping are also deductible.

The Catch:

Major upgrades (like a new roof or HVAC system) must be depreciated over time instead of deducted all at once. A CPA firm in Austin, Texas can help you properly categorize expenses so you get the biggest tax advantage.

5. Property Tax & Insurance – Two Big Deductions You Can’t Forget

Your property taxes and insurance premiums are major expenses, but they’re also fully deductible.

What’s Included?

 ✔ Annual property taxes
 ✔ Landlord insurance premiums
 ✔ Flood or earthquake insurance
 ✔ Umbrella policies for extra liability protection

Many landlords overlook umbrella policies, which provide additional liability coverage. An Austin accounting firm can ensure every eligible insurance deduction is accounted for.

6. Record-Keeping – The Key to Unlocking Every Deduction

A messy tax filing system = lost money. If you’re not tracking your expenses properly, you’re almost guaranteed to miss out on deductions.

Best Practices for Maximizing Deductions:

✔ Use separate bank accounts and credit cards for rental property expenses
 ✔ Keep receipts, invoices, and mileage logs organized
 ✔ Work with an Austin accounting service to streamline your bookkeeping

Not only does this keep more money in your pocket, but it also protects you in case of an IRS audit.

7. Why a CPA Can Uncover Deductions You Didn’t Know Existed

Even experienced landlords miss out on tax-saving opportunities simply because they don’t know what to look for.

How a CPA Can Help:

 ✔ Identify hidden deductions that tax software overlooks
 ✔ Structure your taxes to minimize your liability
 ✔ Ensure IRS compliance so you don’t run into penalties
 ✔ Plan long-term strategies for future investments and tax deferrals

A real estate-savvy Austin, TX accountant doesn’t just file your taxes. They create a strategy that keeps more money in your pocket.

Maximize Your Deductions and Keep More of Your Rental Income

The difference between a standard tax return and a well-planned one? Thousands of dollars in tax savings every year.

If you’re not working with an expert, you could be overpaying the IRS year after year.

At Insogna CPA, we specialize in real estate tax strategies, helping property owners maximize deductions, reduce tax burdens, and stay compliant with IRS regulations. Whether you have one rental or an entire portfolio, our Austin accounting services are designed to help you keep more of what you earn.

Make sure you’re claiming every deduction possible. Schedule a tax planning session today...

Summary of What This Blog Covers:

• Introduces Cost Segregation as a Strategic Tax Tool for Women-Owned Businesses
  This blog explains how cost segregation accelerates depreciation on commercial properties, allowing women entrepreneurs to significantly reduce their taxable income and reinvest those savings into growth, hiring, or additional real estate investments.
  
  
• Clarifies When and How Cost Segregation Works
  It breaks down the difference between standard and accelerated depreciation, provides real-world examples of tax savings, and outlines which types of property owners—especially those who’ve purchased or renovated commercial real estate—can benefit from a cost segregation study.
  
  
• Covers IRS Compliance and Long-Term Planning Considerations
  From proper W9 and 1099 NEC filings to managing depreciation recapture through a 1031 exchange, the blog highlights the importance of working with a certified public accountant who ensures full IRS compliance and helps business owners plan strategically for future property sales.
  
  
• Positions Insogna CPA as a Trusted Tax Partner for Women Entrepreneurs
  The blog emphasizes how Insogna CPA supports clients beyond tax filing, offering real estate-specific tax strategy, cost segregation coordination, and a full-service approach tailored to the goals and values of women-led businesses.

You’ve Built the Business. Now Let’s Make Sure Your Property Is Working for You, Too.

Owning commercial property is more than a real estate move, it’s a strategic investment. It signals growth, stability, and long-term vision. And for women entrepreneurs especially, it’s a bold step toward independence and equity in a space historically dominated by others.

But here’s something most business owners aren’t told: your property can do more than house your business. It can reduce your tax bill. Significantly.

At Insogna CPA, a woman-focused Austin, Texas CPA firm, we work with business owners who are ready to look beyond surface-level savings and make tax strategy an active part of their wealth-building plan.

Enter: cost segregation.

If you’ve purchased or renovated commercial property, and no one has mentioned this strategy to you, it’s time we had a conversation.

What Is Cost Segregation?

Cost segregation is a tax strategy that accelerates depreciation on commercial real estate. Instead of treating your entire building as a single asset that depreciates slowly over 39 years, this strategy breaks down the property into faster-depreciating components. Giving you access to larger tax deductions early on.

Think of it like this: if your building is a cake, cost segregation lets you slice it into ingredients—flour, sugar, butter—so you can get a better understanding of its value. And in this case, a better way to write it off on your taxes.

How Standard Depreciation Works (The Slow Way)

Let’s walk through the traditional approach. If you purchase a commercial building for $1 million:

• Under IRS rules, you typically deduct around $25,600/year in depreciation
  
  
• That’s over 39 years to fully write off your building
  
  
• Meanwhile, your cash flow may be tight, and your need for capital is high, especially in the first few years of ownership
  
  

It’s not that the deduction isn’t useful. It’s just not enough, fast enough, when you’re trying to grow a thriving business.

The Cost Segregation Approach (The Strategic Way)

With cost segregation, your building is broken down into components with shorter depreciation schedules, such as:

• 5-year assets: Carpet, furniture, appliances, certain fixtures
  
  
• 7- to 15-year assets: Landscaping, sidewalks, parking lots, HVAC units
  
  
• 39-year assets: The structural building elements (roof, foundation)
  
  

Result:

You accelerate the depreciation of certain assets, resulting in much higher deductions in the first few years, precisely when you’re making your largest investments in staff, marketing, and expansion.

We work with engineers and tax specialists to conduct cost segregation studies and ensure the strategy is IRS-compliant, then our certified public accountants near you build the tax strategy around it.

Real-World Example: Cost Segregation in Action

Let’s say you purchase a building for $1 million, and $850,000 is allocated to the building (land doesn’t depreciate).

Without cost segregation:
 You take $21,794/year in straight-line depreciation.

With cost segregation:
 You might be able to write off $150,000–$250,000 in the first five years.

That could lower your tax liability by tens of thousands of dollars, freeing up capital you can use immediately.

Why Cost Segregation Matters for Women-Owned Businesses

Women-led businesses are growing at record rates but we also know that women business owners often reinvest more of their income back into their operations.

That means cash flow matters.

Cost segregation supports this reinvestment mindset by:

• Freeing up working capital that would otherwise be tied up in long-term depreciation
  
  
• Reducing taxable income in years when your business needs flexibility
  
  
• Supporting strategic goals like hiring, expanding, or entering new markets
  
  
• Helping you compete with larger companies that have long relied on this exact same strategy
  
  

As your Austin, TX accountant, we don’t just look at what the numbers say. We look at what they mean for your day-to-day business decisions and long-term goals.

Is Cost Segregation Right for You?

It could be, if you:

• Purchased a commercial property for $500,000 or more
  
  
• Made significant renovations or upgrades to an existing property
  
  
• Own retail, office, medical, warehouse, or hospitality space
  
  
• Operate a short-term rental property
  
  
• Plan to sell your property in the future and want to optimize tax timing
  
  

Even if you bought the property years ago, you may be able to apply cost segregation retroactively and recover missed deductions by amending past tax returns.

Your licensed CPA near you can help you explore this option safely and strategically.

How Insogna CPA Supports Women Entrepreneurs

At Insogna CPA, we offer more than just tax prep. We offer partnership, mentorship, and strategy for growth-minded business owners, especially women who are scaling their enterprises with purpose.

Here’s how we support you through the cost segregation process:

• We evaluate your property and improvements to determine the viability of a study
  
  
• We coordinate with certified cost segregation engineers for thorough, IRS-compliant reports
  
  
• We integrate the findings into your depreciation schedule and tax filings
  
  
• We guide you in reinvesting the tax savings for maximum long-term impact
  
  

Our team includes chartered public accountants, certified professional accountants, and taxation accountants who specialize in real estate, business ownership, and proactive planning.

We understand that you’re not just managing a property, you’re growing a vision.

What About IRS Compliance?

Let’s address the elephant in the room: yes, cost segregation is highly technical, and yes, the IRS watches closely. That’s why it’s critical to do it right the first time.

At Insogna CPA, we provide full compliance support, including:

• W9 tax form collection from contractors
  
  
• 1099 NEC filings for vendors paid $600+
  
  
• FBAR filing if your income involves foreign bank accounts
  
  
• Proper Schedule E or C classification, depending on how the property is used
  
  
• Audit support and proactive documentation strategies
  
  

Compliance isn’t just a box we check. It’s a mindset we build into your entire tax planning process.

Don’t Forget Depreciation Recapture And How to Manage It

If you’ve been depreciating property for years, and then sell, the IRS will want their cut back. It’s called depreciation recapture, and it’s typically taxed at 25%.

But there’s a solution: the 1031 exchange.

This strategy allows you to defer the taxes by reinvesting proceeds into a like-kind property. We’ve helped clients defer six-figure tax bills by coordinating 1031 exchanges across multiple states.

Our CPA firm in Austin, Texas handles:

• Exchange timelines and deadlines
  
  
• Coordination with qualified intermediaries
  
  
• Multi-state compliance for complex portfolios
  
  
• Real-time planning so you never get caught off guard
  
  

The Real Estate Tax Planning Checklist

Before you file, make sure you’ve:

✔ Evaluated your property for cost segregation opportunities
 ✔ Filed depreciation properly (including land/building split)
 ✔ Documented improvements vs. repairs
 ✔ Issued W9s and 1099s as needed
 ✔ Explored a 1031 exchange if you’re selling
 ✔ Discussed REPS or STR qualifications if applicable
 ✔ Partnered with a certified CPA near you who understands commercial property strategy

Why Women-Led Businesses Choose Insogna CPA

We’re more than a filing service. We’re a firm that champions women entrepreneurs, from first investment to exit planning.

Why our clients stay with us:

• We provide real-time tax help, not just once-a-year meetings
  
  
• Our team includes certified CPAs, enrolled agents, and certified general accountants
  
  
• We specialize in services accounting tailored to property owners
  
  
• We bring clarity to complex real estate tax rules
  
  
• We offer strategic planning that scales with your business and lifestyle goals
  
  

Whether you’re managing your first office space or scaling across states, we’re here to help you navigate the tax landscape with confidence and with a plan.

Let’s Put Your Property to Work for You

You invested in real estate for good reasons. Now it’s time to make sure that investment is working just as hard for your business as you are.

Book a consultation today with Insogna CPA, your trusted Austin tax accountant and strategic advisor for women-owned businesses. Together, we’ll explore whether cost segregation is right for you and start building a tax plan that reflects your vision, values, and next big step.

Because real estate isn’t just an asset, it’s a strategy. And you deserve to get every dollar of value from it...

Summary of What This Blog Covers:

• Debunks Five of the Most Costly Myths in Real Estate Tax Planning
  This blog breaks down common real estate tax misconceptions like whether you need an LLC, how rental income is taxed, and what expenses are actually deductible so investors can avoid mistakes that lead to overpaying the IRS.
  
  
• Explains Strategic Tax Tools for Smarter Real Estate Investing
  From cost segregation and depreciation schedules to Real Estate Professional Status (REPS) and short-term rental reclassification, the blog highlights advanced strategies that can reduce tax liability and increase cash flow for real estate investors.
  
  
• Covers Tax Compliance Essentials That Investors Overlook
  The blog stresses the importance of staying compliant with IRS requirements, including collecting W9s, filing 1099 NEC forms, tracking quarterly estimates, and preparing for depreciation recapture, all key responsibilities that can be streamlined with help from a trusted CPA firm in Austin, Texas.
  
  
• Highlights Why Working with a Specialized CPA Makes All the Difference
  Whether you’re a new investor or managing a growing portfolio, this blog explains why real estate tax planning requires more than tax software and how working with a licensed CPA near you who understands real estate can lead to long-term financial advantages.

Whether you’re a first-time rental property owner or scaling a multi-state portfolio, one thing is universal: taxes matter. A lot.

You’re in the real estate game to build wealth, not to become an expert in IRS publications or tax codes. But here’s the thing: if you rely on outdated advice or tax software alone, you could be overpaying the IRS every single year.

At Insogna CPA, a real estate-savvy Austin, Texas CPA firm, we help investors like you understand the difference between smart tax planning and missed opportunities. And it often starts with unlearning what you thought you knew.

Let’s break down five of the most common real estate tax myths and how to fix them so you can keep more of your hard-earned money.

1. “I Don’t Need an LLC for My Rental Property.”

Technically, you’re right. You don’t have to own your rental through an LLC. Many new investors start by holding property in their personal name and legally, that’s allowed.

But here’s what you’re not hearing:

• You’re personally liable. If a tenant sues you and you lose, your personal assets (your house, your car, your savings) are exposed.
  
  
• It may impact your financing. Some lenders prefer working with LLCs for investment properties. Others penalize you for not separating business and personal finances.
  
  
• You may be missing strategic tax benefits. When structured right, an LLC can help with estate planning, pass-through taxation, and separating your rental business from your personal finances.
  
  

At Insogna CPA, a go-to small business CPA in Austin, we help you weigh the pros and cons of forming an LLC, understand how it impacts taxes, and structure your portfolio for both protection and long-term growth.

2. “Rental Income Is Always Taxed in the Year I Receive It.”

This one trips up more investors than you’d think.

What’s true:

• Advance rent is taxable the year it’s received. Even if the payment covers next year, it’s income now.
  
  
• Security deposits are not taxable as long as they’re refundable and used only for damages.
  
  

But here’s what’s often missed:

• You’re taxed on net income, not gross rent. That means every deduction: depreciation, repairs, interest, property management reduces your taxable income.
  
  
• Depreciation can offset thousands in income.
  
  
• Carryforward losses can be used in future years.
  
  

A skilled Austin, TX accountant can help you structure and report rental income in a way that reduces your current and future tax burden.

3. “Everything I Spend on My Property Is Deductible.”

This one feels like it should be true. But the IRS sees things a little differently.

What’s immediately deductible:

• Repairs (fixing a leak, replacing a broken appliance)
  
  
• Property management fees
  
  
• Insurance premiums
  
  
• Advertising
  
  
• Travel to and from the property
  
  

What must be depreciated:

• Capital improvements (roof replacements, HVAC systems, new flooring)
  
  
• Appliances if part of an overall renovation
  
  
• Major upgrades to the structure or property systems
  
  

This distinction matters. Mislabeling an improvement as a repair could raise IRS scrutiny. That’s why our chartered professional accountants and taxation accountants walk you through each expense category, so nothing gets misfiled.

At Insogna CPA, a full-service Austin accounting firm, we make sure you know what qualifies for immediate deduction and what needs to be depreciated over time.

4. “I Don’t Need a CPA Until I Own Multiple Properties.”

We hear this one all the time, usually from folks who are now fixing avoidable mistakes from their first return.

The truth is, even one property can complicate your taxes more than you think.

Here’s why:

• Depreciation starts the moment your property is placed in service. If you don’t structure it right from the start, you could miss thousands in deductions.
  
  
• Entity structure matters from day one. Changing it later often involves legal fees and tax headaches.
  
  
• The IRS treats short-term rentals and long-term rentals differently. And that distinction matters.
  
  

Working with a CPA in Austin, Texas from the start means you’ll be able to optimize deductions, document everything properly, and stay IRS-compliant before tax season becomes a mad scramble.

5. “My Tax Software Catches All My Deductions.”

We love a good tech tool. But your tax software is only as smart as the person using it and it won’t ask the same questions a real CPA will.

What your tax software won’t do:

• Recommend a cost segregation study to accelerate depreciation
  
  
• Help you qualify for Real Estate Professional Status (REPS)
  
  
• Plan for 1031 exchanges to defer capital gains
  
  
• Distinguish between passive vs. non-passive income under IRS rules
  
  

Tax software is great for basic returns. But when you own rental property, have multiple income streams, or plan to scale your portfolio, you need real, human insight from a licensed CPA near you who specializes in real estate.

At Insogna CPA, one of the most responsive CPA firms in Austin, Texas, we build your tax strategy around your goals, not just your past income.

Thinking About Selling? Don’t Forget Depreciation Recapture

Let’s talk about what happens when you sell.

You’ve been deducting depreciation for years, great! But now the IRS wants a piece of that in the form of recapture tax, typically at 25%.

Want to avoid that hit?

Consider a 1031 exchange. This IRS-sanctioned strategy lets you sell one property, reinvest the proceeds into a new one, and defer taxes on both capital gains and depreciation recapture.

At Insogna CPA, we help investors:

• Navigate exchange timelines
  
  
• Coordinate with qualified intermediaries
  
  
• Ensure full IRS compliance
  
  
• Manage multi-state tax filings
  
  

Don’t wait until the sale closes. Talk to a tax advisor near you before your property hits the market.

Compliance Matters Even for the Savvy Investor

All the deductions in the world won’t help you if your filings aren’t correct.

That’s why our clients rely on us for:

• W9 tax form collection
  
  
• 1099 NEC filings for contractors paid over $600
  
  
• FBAR filing if rental income touches foreign bank accounts
  
  
• Schedule E vs. Schedule C classifications
  
  
• Quarterly estimate tracking and year-end tax planning
  
  

A proactive approach with your Austin accounting service means no surprises and a cleaner path to building wealth.

Real Estate Tax Planning Filing Checklist

Before you file, double-check that you’ve: ✔ Properly tracked and categorized all expenses
 ✔ Filed W9s, 1099 NECs, and FBAR forms
 ✔ Separated building vs. land value for depreciation
 ✔ Considered cost segregation for properties over $500,000
 ✔ Explored REPS or STR reclassification for passive loss deductions
 ✔ Planned for depreciation recapture or 1031 exchanges
 ✔ Partnered with a certified CPA near you who understands real estate

Why Real Estate Investors Choose Insogna CPA

You’re not just filing a return, you’re growing a business. You need more than software or a once-a-year tax meeting.

At Insogna CPA, your trusted Austin, TX accountant, we provide:

• Deep real estate tax experience across residential and commercial investments
  
  
• A full team of certified public accountants, chartered professional accountants, and taxation accountants
  
  
• Year-round tax help, including cost segregation analysis, entity structuring, and 1031 exchange tax strategy
  
  
• Personalized planning that scales with your portfolio
  
  
• One of the most responsive, client-focused CPA firms near you
  
  

Whether you’re navigating your first Schedule E or your tenth property sale, we’re here to help you plan smarter, file stronger, and keep more of what you earn.

Schedule Your Free Tax Review Today

Still wondering if your tax strategy is as strong as your investment strategy?

Let’s talk.

Book your free consultation with Insogna CPA, your real estate-focused Austin, Texas CPA, and let’s make sure your next return is more than just filed. It’s optimized for growth.

Because in real estate, it’s not about what you make. It’s about what you keep...