Tax on Rental Income

Summary of What This Blog Covers:

• Uncovers Why High-Income Earners Often Miss Key Real Estate Tax Benefits
  This blog explains how most successful business owners overlook powerful rental property tax strategies due to misconceptions about passive loss limitations, basic tax software, or passive CPAs and how real estate can unlock substantial savings.
  
  
• Explores Six High-Impact Ways Rental Properties Reduce Tax Liability
  From depreciation and cost segregation to short-term rental loopholes and real estate professional status, the blog outlines specific tactics that can dramatically lower a high earner’s taxable income.
  
  
• Covers Compliance Essentials for Real Estate Investors
  You’ll learn what forms to file, how to classify rental income properly, and why clean documentation is essential, especially if you’re managing multiple properties or operating across states.
  
  
• Positions Insogna CPA as a Strategic Tax Partner for Long-Term Wealth
  The blog highlights why high earners choose Insogna CPA for real estate tax planning. Offering not just tax prep, but proactive strategy, year-round guidance, and personalized support from a certified public accountant in Austin, Texas.

You’re Crushing It in Business… So Why Is Your Tax Bill Crushing You?

Let’s talk about a not-so-fun reality of high-income success: taxes.

You’ve built something amazing. Your business is thriving, you’re investing in your growth, and revenue is strong. But every spring, it feels like you’re writing a massive check to the IRS and wondering, “How is this still legal?”

If this sounds familiar, you’re not alone.

At Insogna CPA, a leading Austin, Texas CPA firm, we work with high-income earners—agency founders, tech consultants, creative entrepreneurs, doctors, and business owners—who want smarter, more proactive solutions for lowering their tax burden.

And one of the most overlooked opportunities? Rental real estate.

We’re not saying you have to become a full-time landlord. But if you want to pay less in taxes and build long-term wealth, real estate is one of the most effective tools in the tax code.

Here’s how rental properties can help high-income earners stop overpaying and start planning.

Why High Earners Miss Out on Rental Property Tax Benefits

Real estate isn’t new. But what’s surprising is how few high-income earners truly understand how to use it as a tax strategy.

Here are three reasons most people leave money on the table:

1. They Assume Passive Losses Don’t Help Them

Under IRS rules, passive losses (like those from rental properties) generally can’t offset active income unless you meet certain requirements. So most people just give up.

But here’s the thing: there are exceptions. With the right structure, classification, and documentation, passive losses can reduce your tax liability. It just takes some planning from an experienced tax advisor near you who knows real estate inside and out.

2. Their CPA Isn’t Being Proactive

Not all accountants are created equal. Many are good at filing your numbers but bad at helping you lower them. If your current tax preparer near you isn’t talking to you about depreciation, cost segregation, real estate professional status, or even a 1031 exchange, they’re leaving money on the table.

3. They’re Relying on Basic Tax Software

Tools like TurboTax are great for W-2 employees with a simple return. But if you’re earning multiple six figures, running a business, and thinking about long-term strategy? You need a licensed CPA in Austin, Texas who knows how to get tactical with your tax planning.

How Rental Properties Can Lower Your Tax Bill

Let’s get into the good stuff: how real estate can actually save you money on your taxes without gimmicks or sketchy loopholes.

Here are six ways we help high-income earners reduce their tax burden using rental properties:

1. Depreciation: A Legal Way to Lower Your Taxable Income

Depreciation is one of the best gifts the IRS gives to real estate investors.

It allows you to deduct a portion of a property’s cost (excluding land) every year over 27.5 years for residential real estate.

Real-World Example:

You buy a $650,000 duplex. After allocating $550,000 to the building, you can deduct $20,000+ annually in depreciation even if your property’s value is going up.

That’s $20,000 off your taxable income every year for nearly three decades.

Working with a strategic Austin tax accountant (like our team at Insogna CPA), you can accelerate depreciation even further with a cost segregation study.

2. Cost Segregation: Accelerate Deductions, Maximize Cash Flow

Instead of spreading depreciation evenly, a cost segregation study breaks the property into components (appliances, lighting, flooring) that can be depreciated faster for over 5, 7, or 15 years.

Why it matters:

• Front-loads tax savings
  
  
• Boosts early-year cash flow
  
  
• Reduces your overall tax bill in the years you need it most
  
  

A great strategy for properties over $500,000 but increasingly useful even for smaller investments.

Our Austin accounting service partners with engineers and handles the tax reporting for you so the savings are real, and the compliance is locked in.

3. Real Estate Professional Status (REPS): The Ultimate High-Earner Advantage

If you or your spouse qualify as a real estate professional (under IRS rules), you can use rental losses to offset active income including your business income or W-2 earnings.

REPS Requirements:

• Spend 750+ hours per year materially participating in real estate
  
  
• More than 50% of your working time is in real estate
  
  

Why it matters:

• Unlocks passive losses
  
  
• Can wipe out a significant portion of your tax liability
  
  
• Works even better with cost segregation + depreciation
  
  

Not sure if you qualify? As a small business CPA in Austin, we’ll help you track your hours, document participation, and file properly.

4. Short-Term Rentals: The Loophole Most High Earners Overlook

Thinking of going the Airbnb route? Here’s what you need to know:

Short-term rentals (STRs) where the average guest stay is less than 7 days, don’t always fall under passive activity rules. This means you may be able to deduct rental losses against ordinary income, even if you don’t qualify as a real estate professional.

Benefits of STRs:

• No need for REPS (in some cases)
  
  
• Faster depreciation through asset turnover
  
  
• Flexible use as investment + personal/vacation home
  
  

There are rules (of course), and you’ll want a proactive CPA office near you to make sure you’re compliant. But when structured right? Short-term rentals can create a tax shelter and generate great income.

5. Home Office Deduction: Easy Savings Most High Earners Miss

If you’re managing your rental properties or even your business, from home, you may qualify for the home office deduction.

A percentage of your:

• Rent or mortgage
  
  
• Utilities
  
  
• Internet
  
  
• Home maintenance
  
  

…can all be deducted, as long as the space is used exclusively for work.

We’ll help you calculate this properly as part of our tax preparation services near you, no guessing required.

6. 1031 Exchange: Keep Growing, Keep Deferring Taxes

Planning to sell a property and buy another?

With a 1031 exchange, you can reinvest your profits into another “like-kind” property and defer capital gains taxes.

This is one of the most powerful tools available to real estate investors but only if it’s executed properly.

At Insogna CPA, we’ve helped clients across multiple states and asset classes complete successful exchanges. From paperwork to timelines to compliance, we’ve got you covered.

Let’s Not Forget Compliance: Where High-Earners Get Tripped Up

Even with all these savings, compliance is key. Here’s what many high earners overlook:

You may need to:

• File W9 tax forms for contractors and vendors
  
  
• Issue 1099 NEC forms for anyone you pay over $600
  
  
• Submit FBAR filings if you use foreign accounts for rental income
  
  
• Correctly classify your income on Schedule E or Schedule C
  
  
• File multi-state returns for out-of-state property investments
  
  

Our team of certified CPAs, chartered professional accountants, and enrolled agents keeps your filings clean, your documentation audit-ready, and your strategy airtight.

Let’s Recap Your Real Estate Tax Strategy as a High Earner

What You Could Be Doing:

✔ Claiming depreciation annually
 ✔ Accelerating deductions with cost segregation
 ✔ Tracking and deducting every eligible expense
 ✔ Qualifying (or leveraging) REPS or STR loopholes
 ✔ Using 1031 exchanges to build tax-deferred wealth
 ✔ Working with a real estate-savvy CPA near you for proactive planning

Why High Earners Choose Insogna CPA

You’re not looking for a “tax preparer near you” who shows up once a year and prints out a return. You’re looking for:

• A strategic partner
  
  
• A growth-focused tax team
  
  
• A responsive, experienced Austin, TX accountant who understands your goals
  
  

At Insogna CPA, we deliver all of that. Backed by decades of experience in services accounting, entity strategy, real estate tax planning, and high-net-worth consulting.

We’re not just a CPA in Austin, we’re your personal tax strategist for the long game.

Ready to Build a Smarter, More Strategic Tax Plan?

You’ve already proven you can earn. Now let’s make sure you keep more of it.

Whether you’re just getting started with real estate or scaling up your rental empire, we’re here to help you:

• Reduce your tax liability
  
  
• Stay compliant
  
  
• Build wealth more efficiently
  
  
• Use the tax code to your advantage, not just react to it
  
  

Schedule a consultation with Insogna CPA today. Your go-to Austin tax accountant and strategic partner for smarter investing, lower taxes, and real estate-backed growth...

Summary of What This Blog Covers:

• Uncovers the Most Common Tax Mistakes Rental Property Owners Make
  This blog walks through the five biggest missteps landlords make with their taxes from missing deductions to poor recordkeeping and explains how those mistakes can lead to overpayments, IRS scrutiny, or lost tax savings.
• Breaks Down Real-World Fixes and Strategies for Smarter Tax Planning
  You’ll learn exactly how to avoid each mistake with practical fixes like tracking expenses monthly, evaluating if an LLC truly benefits you, and leveraging proactive year-end planning for better returns.
• Highlights Advanced Tax Tactics Like Cost Segregation and 1031 Exchanges
  The post dives into how strategic tools like cost segregation studies and 1031 exchanges can accelerate depreciation and defer capital gains, helping landlords significantly reduce taxable income.
• Explains the Value of Working with a Real Estate-Focused CPA
  With guidance from Insogna CPA, a trusted Austin, Texas CPA firm, readers discover why partnering with a certified public accountant who specializes in rental properties is key to growing a portfolio tax-efficiently and staying compliant year-round.

So, you did it. You bought a rental property. Maybe it’s a single-family home you’re renting out for the first time. Maybe it’s your third cash-flowing duplex and you’re gearing up for more.

You’ve got tenants, rent rolling in, and appreciation on your side.

Now comes the fun part: taxes.

At Insogna CPA, a top-rated Austin, Texas CPA firm, we help property owners across the country get ahead of tax season, minimize their liabilities, and grow their portfolios with strategy, not guesswork.

But we see it all the time: landlords overpaying, underreporting, or missing out on thousands in savings simply because no one explained the rules. Until now.

Here are the top 5 tax mistakes rental property owners make, how they cost you money, and most importantly: how to fix them.

Mistake 1: Missing Out on All Eligible Deductions

You’d be shocked how many landlords leave money on the table every year, especially when it comes to deductions.

The IRS allows rental property owners to deduct all ordinary and necessary expenses related to running and maintaining their rental. But unless you’re keeping proper records, it’s easy to forget or misclassify these expenses.

Major deductions most landlords forget:

• Mortgage interest: Often the largest deduction for real estate investors
• Property taxes: Deductible at both state and federal levels
• Depreciation: A non-cash expense that lowers your taxable income over 27.5 years
• Repairs and maintenance: Immediate deductions for items like paint touch-ups, appliance replacements, and basic upkeep
• Insurance premiums: Includes landlord, hazard, liability, and even umbrella policies
• Legal and professional services: Paying a tax accountant near you, attorney, or property manager? That’s deductible.
• Travel expenses: Visiting your property? That mileage counts.
• Advertising and tenant placement costs

   

• HOA dues and condo fees

   

What NOT to do:

Assume your tax software will catch everything. Most off-the-shelf tools don’t specialize in real estate deductions.

Fix it:

Track your expenses monthly, store receipts digitally, and work with a qualified tax preparer near you or a CPA in Austin, Texas who understands the nuances of rental income and deductions.

Mistake 2: Filing Under the Wrong Structure—LLC vs. Sole Proprietor

Let’s talk about the LLC hype.

We’ve heard it all:

• “You have to form an LLC for liability protection.”
• “LLCs save you tons on taxes.”
• “No serious investor holds rentals in their personal name.”

There’s some truth in there but also a lot of misunderstanding.

Sole Proprietor (personal ownership):

• The most common form of ownership
• Income reported on Schedule E

   

• No entity setup costs or state compliance required

LLC:

• Offers limited liability protection

   

• Income is still reported on Schedule E unless you elect S-corp status
• May require annual filings, franchise taxes, and separate recordkeeping

In states like California, an LLC will cost you $800 per year minimum in fees even if the rental isn’t generating income.

What NOT to do:

Form an LLC just because your Facebook investing group told you to.

Fix it:

Schedule a conversation with a small business CPA in Austin. At Insogna CPA, we’ll assess your portfolio, risk level, and goals to help you decide whether an LLC (or other structure) actually makes sense for you.

Mistake 3: Not Taking Advantage of Cost Segregation

Here’s one of the most underused strategies in rental real estate:

Cost segregation.

This IRS-approved method lets you accelerate depreciation on parts of your property with shorter lifespans so you can deduct more, sooner.

Here’s how it works:

Instead of depreciating the entire property over 27.5 years, you break it into:

• 5-year assets: Carpet, appliances, furniture
• 7-year assets: Cabinets, lighting fixtures
• 15-year assets: Landscaping, fencing, sidewalks

This results in front-loaded deductions, meaning you reduce your taxable income when you need it most: usually in the early years of ownership.

Why it matters:

• Lowers your tax bill today
• Boosts your cash flow for reinvestment
• Can significantly reduce taxable income even if your property is appreciating

What NOT to do:

Assume cost segregation is only for large commercial properties or institutional investors.

Fix it:

Let our team at Insogna CPA, a respected Austin accounting service, evaluate whether your property qualifies. We coordinate with certified engineers and file everything in compliance with IRS guidelines.

Mistake 4: Inadequate Recordkeeping

We get it. Receipts get lost, mileage logs fall by the wayside, and suddenly, it’s April and your bookkeeping is held together with hope and duct tape.

But if you’re ever audited or just trying to maximize deductions, proper records are everything.

Most common recordkeeping mistakes:

• No separate business account for rental income/expenses
• No saved receipts for services or repairs
• No logs for travel/mileage
• Forgetting to issue W9 tax forms to vendors
• Missing 1099 NEC filings for contractors paid over $600

Fix it:

• Open a dedicated business bank account

   

• Track all transactions with real estate-focused software
• Use a mileage tracking app
• Work with an enrolled agent or certified public accountant near you who helps you stay on top of reporting deadlines and documentation

We offer services accounting for property owners who want an easier, cleaner system and peace of mind when tax time comes.

Mistake 5: Waiting Until Tax Season to Start Planning

Here’s the difference between a reactive and proactive investor:
 The proactive one doesn’t scramble in April.

They make moves in October, November, and December to reduce their tax bill for the current year.

Here’s what you can do before year-end:

• Prepay expenses (insurance, taxes, maintenance)
• Complete repairs or upgrades this year to claim deductions sooner
• Use Section 179 or bonus depreciation on eligible assets
• Consider a 1031 exchange to defer capital gains
• Contribute to retirement accounts (like SEP IRAs for landlords who qualify)

What NOT to do:

Wait until tax season to think about strategy. That’s when your options are limited.

Fix it:

Book a year-end tax planning session with your tax advisor near you. At Insogna CPA, we help investors look forward not just back so they can keep more of their rental profits.

Bonus: Other Commonly Missed Moves

Forgetting to file FBAR:

If you have rental income in foreign accounts, FBAR filing is mandatory. Penalties are steep, don’t skip it.

Not issuing W9s or 1099 NECs:

If you pay a contractor more than $600, you need their W9 and you must file a 1099 NEC with the IRS.

Confusing Schedule E and Schedule C:

If you offer short-term stays with services (like cleaning or meals), your income may fall under Schedule C which could be subject to self-employment tax.

If you’re unsure which applies, call us. We’re your proactive CPA firm in Austin, Texas who actually answers when you need help.

Let’s Recap Your Rental Tax Strategy

✅ What You Should Be Doing:

• Claiming every deduction
• Knowing when an LLC helps and when it doesn’t
• Exploring cost segregation for larger properties
• Tracking expenses and mileage accurately
• Filing forms correctly and on time
• Working with a licensed CPA near you for real estate-specific support

Why Work With Insogna CPA

We’re not a generic tax preparer near you who inputs numbers and calls it a day. We’re a strategic partner who helps you grow your portfolio smartly and tax-efficiently.

When you work with us, you get:

• A highly experienced Austin, TX accountant who understands property investing
• Year-round tax planning, not just April filings
• A team of certified CPAs, chartered public accountants, and taxation accountants

   

• Personal support that scales with your rental business

Whether you’re managing one short-term rental or building a portfolio across states, we’re the CPA firm in Austin that’s built to serve real estate investors.

Ready to Fix These Tax Mistakes?

If you’re serious about building wealth with real estate, you need a tax strategy to match.

Schedule a consultation with Insogna CPA, your trusted tax accountant in Austin, Texas, and let’s get to work protecting your rental income, reducing your tax burden, and setting you up for growth.

Because your real estate business deserves more than a once-a-year tax return. It deserves a year-round strategy...

So, you finally did it. You bought a rental property! Welcome to the world of passive income, appreciation, and… complicated tax rules.

If you’ve started researching rental property taxes, you might already feel overwhelmed.

“Do I have to pay self-employment tax on rental income?”
“What can I deduct to lower my tax bill?”
“How does depreciation work?”

If this sounds familiar, you’re not alone. Most first-time landlords go through the same confusion. But don’t worry, we’ve got you covered.

At Insogna CPA, a trusted Austin, Texas CPA firm, we help real estate investors like you maximize deductions, stay IRS-compliant, and keep more of your hard-earned rental income. Let’s break it all down in simple, no-BS terms so you can handle tax season like a pro.

How Rental Property Income is Taxed (Without the Confusion)

First things first: Yes, rental income is taxable. But it’s not the same as getting taxed on your paycheck.

Key things to know:

• Rental income is considered passive income, so it’s NOT subject to self-employment tax.
• You’re taxed on your profit, not just total rent collected, which means deductions are your best friend.
• You report rental income and expenses on Schedule E of your tax return.

The key takeaway? The IRS wants their cut, but they also give landlords plenty of tax breaks if you know how to use them.

The Best Rental Property Tax Deductions (AKA, How to Pay Less in Taxes)

Owning rental property comes with a lot of deductible expenses—which means more tax savings for you.

Here are the top deductions every landlord should know about:

✔ Mortgage Interest – Your biggest tax write-off. Interest on your rental loan? Fully deductible.

✔ Property Taxes – State and local property taxes can be written off on your return.

✔ Repairs & Maintenance – Fixing a broken AC, patching up leaks, or replacing an appliance? Deductible.

✔ Insurance Premiums – Rental property insurance, liability coverage, and even umbrella policies can be deducted.

✔ Property Management Fees – If you hire someone to handle tenants and maintenance, their fees are a write-off.

✔ Utilities (If You Pay Them) – If you cover water, gas, or electricity, those expenses are deductible too.

✔ Travel Expenses – If you drive or fly to check on your rental, you can deduct mileage, flights, and even lodging—if the trip is business-related.

Pro Tip: Keep receipts for everything. The IRS loves documentation, and a simple spreadsheet (or using an app like QuickBooks) can make tax time way easier.

Depreciation: The Secret Tax Advantage of Owning Rentals

One of the biggest tax benefits of real estate? Depreciation.

What is Depreciation?

Depreciation allows you to spread out the cost of your property over 27.5 years, lowering your taxable income every single year.

What Can You Depreciate?

• The cost of the building (not the land).
• Big improvements (new roof, HVAC, flooring).
• Appliances and furniture used for the rental.

Example: Bought a rental for $275,000? If the building is worth $200,000, you can deduct about $7,272 per year in depreciation. That’s a major tax break.

Mistake to avoid: Not claiming depreciation. It’s required, and if you don’t claim it now, the IRS will still tax you later when you sell the property.

How Insogna CPA helps: As an experienced CPA in Austin, Texas, we make sure you get every depreciation deduction you’re entitled to without IRS headaches.

Passive vs. Active Income: What It Means for Your Taxes

Not all rental income is taxed the same. Your classification as a passive or active investor impacts how much you can deduct.

Passive Income (Most Landlords)

• Rental income is passive by default (which is a good thing—it avoids self-employment tax).
• Passive losses (like depreciation) can only offset passive income not your W-2 salary.
• If your total income is under $150,000, you may be able to deduct up to $25,000 in passive losses per year.

Active Income (Real Estate Professionals)

If you spend 750+ hours per year managing properties, you may qualify as a real estate professional—which means you can deduct rental losses against ALL income (including W-2 earnings).

How Insogna CPA helps: Not sure where you fall? We’ll analyze your situation and ensure you’re using the best tax strategy.

How to Report Rental Income (Without Screwing It Up)

You’ll report all rental income and expenses on Schedule E (Form 1040).

What you’ll need:

• Total rent collected
• Expense records (utilities, repairs, insurance, etc.)
• Depreciation calculations
• Mortgage interest and property tax statements

Common mistakes to avoid:

• Forgetting to report all rental income (yes, that includes security deposits used for repairs).
• Misclassifying repairs vs. improvements (repairs = immediate deduction, improvements = depreciated over time).
• Not tracking travel costs (visiting your rental for business? Deductible).

How Insogna CPA helps: As a leading Austin accounting service, we handle the complex reporting for you, ensuring no deductions are missed and no IRS mistakes happen.

Rental Property Tax Checklist for First-Time Landlords

✔ Keep organized records of all income and expenses.
✔ Claim every deduction possible (mortgage interest, insurance, repairs, etc.).
✔ Use depreciation to lower taxable income.
✔ Know if your rental income is passive or active.
✔ File your rental property taxes properly on Schedule E.

Want to pay less in taxes and avoid IRS headaches? Let’s make sure you’re set up for success.

Need Help with Rental Property Taxes? We’ve Got You.

Real estate investing should build your wealth not drain it with unnecessary taxes. Let Insogna CPA handle the tax side, so you can focus on growing your investments...

Schedule a consultation today with Insogna CPA, your go-to Austin, TX accountant, and start maximizing your rental tax savings!

Summary of What This Blog Covers:

• Breaks Down Common Misconceptions About LLCs for Real Estate
  This blog clarifies widespread myths about forming an LLC for rental properties like the false belief that it automatically saves on taxes or provides blanket liability protection and explains what it actually does (and doesn’t) offer.
  
  
• Compares LLCs and Umbrella Insurance for Liability Coverage
  Readers learn the real differences between forming an LLC and buying umbrella insurance, helping them decide which structure better suits their rental strategy based on cost, protection, and simplicity.
  
  
• Explains the Tax Impact and Compliance Requirements of LLCs
  The post dives into the tax implications of LLC ownership, including pass-through taxation, additional filing obligations, and why most rental LLCs don’t reduce tax liabilities without proper planning.
  
  
• Provides a Strategic Framework for Long-Term Portfolio Planning
  With guidance from a trusted Austin, Texas CPA firm, readers discover when an LLC makes sense for scaling, estate planning, 1031 exchanges, and reducing risk alongside tips for staying compliant and future-ready.

So, you bought a rental property. Maybe it’s your first, maybe it’s the fifth deal you’ve closed this year (look at you go). Either way, the monthly income is rolling in, the tenants are texting you less often than expected, and your equity is climbing.

Then the question hits:
 “Should I put my rental property in an LLC?”

If you’ve been anywhere near a real estate investing podcast, Facebook group, or late-night investor Reddit thread, you’ve probably heard:

• “You HAVE to use an LLC! What if someone sues you?”
  
  
• “It’s a tax strategy! You’ll save thousands!”
  
  
• “No one seriously invests without one!”
  
  

But here’s the thing: the truth is more nuanced.

At Insogna CPA, a leading Austin, Texas CPA firm, we work with rental property owners, landlords, and real estate investors every day. We help clients make strategic, not emotional, decisions because an LLC is a legal structure, not a magic shield.

Let’s dig into the real pros, cons, tax implications, and legal considerations of using an LLC for your rental property and how to know if it’s truly right for you.

What Most Investors Get Wrong About LLCs

LLCs are often misunderstood in the rental real estate space. The myths swirl faster than a bidding war in a hot market.

Let’s set the record straight.

Myth #1: An LLC protects everything

LLCs can protect your personal assets but only if you manage them correctly. That means:

• Maintaining a separate bank account
  
  
• Keeping detailed books
  
  
• Filing necessary documents
  
  
• Treating it like a business, not a side hustle
  
  

Otherwise, a court can pierce the corporate veil and you’re personally on the hook.

Myth #2: An LLC automatically reduces your taxes

Wrong again. Most rental property LLCs are pass-through entities. That means your income flows through to your personal tax return, where it’s taxed the same as if you owned the property outright.

Myth #3: You don’t need insurance if you have an LLC

We wish it were that simple. The LLC structure protects your personal assets, not the asset itself. You still need robust landlord insurance and possibly an umbrella policy to cover lawsuits, accidents, and property damage.

As your trusted Austin, TX accountant, our job isn’t to sell you on an LLC. It’s to guide you to the smartest structure for your goals, your risk profile, and your portfolio growth plans.

LLC vs. Umbrella Insurance: A Practical Comparison

We’ve had this conversation hundreds of times. Most investors want to know if they can get the protection of an LLC without the red tape. Enter: umbrella insurance.

Here’s a side-by-side comparison:

Our recommendation:

• For first-time landlords or small portfolios, umbrella insurance may be all the protection you need.
  
  
• If you have multiple properties, partners, or significant personal assets, adding LLCs can create strategic risk separation.
  
  

At Insogna CPA, a seasoned tax consultant near you, we help you evaluate your entire risk profile and build a structure that doesn’t just work now but works as you scale.

When Does an LLC Make Sense for Your Rental Property?

Let’s get real: LLCs are not bad. They’re just often misused or misunderstood.

Here’s when they really shine:

✅ You own multiple rental properties

An LLC can separate liabilities and shield your entire portfolio from a single incident. We often recommend one LLC per property or using a Series LLC where available.

✅ You plan to bring on partners

LLCs allow you to outline ownership percentages, responsibilities, and profit-sharing in a formal operating agreement. Something you’ll want before anyone wires a dime.

✅ You’re investing across state lines

Out-of-state properties come with registration and filing obligations. Forming an LLC can help centralize your operation, especially if you plan to scale across markets.

✅ You have a high net worth

If you’ve built significant personal assets, an LLC offers an added layer of legal protection if managed properly.

⚠️ When might you not need an LLC?

• You own one or two rental units and have a solid insurance policy
  
  
• You’re renting a part of your primary residence
  
  
• You live in a state with high LLC fees (looking at you, California—$800 per year)
  
  

Working with an experienced small business CPA in Austin, we help you assess the real risk vs. reward.

The Tax Reality: What an LLC Actually Does (and Doesn’t)

Here’s where investors really get tripped up.

What an LLC doesn’t do:

• It does not automatically reduce your taxes
  
  
• It does not add new deductions
  
  
• It does not change your income classification
  
  

In most cases, your LLC will be taxed as a disregarded entity, meaning the income lands on your personal return via Schedule E. You’ll still claim depreciation, mortgage interest, repairs, and other common deductions.

What it can do:

• Help you track income and expenses more cleanly
  
  
• Allow for tax elections (like an S-corp) if you’re offering substantial services
  
  
• Enable partner profit splitting and other planning opportunities
  
  

And yes, forming an LLC may create extra tax filings:

• State-level franchise taxes
  
  
• Annual reports and fees
  
  
• Possible need for a separate CPA-prepared return for your LLC
  
  

This is why rental property investors choose Insogna CPA for tax preparation services near them. We keep your filings organized, compliant, and optimized for long-term gain.

Compliance Isn’t Optional (If You Want Protection to Stick)

If you decide to form an LLC, great. But now it’s time to treat it like a real business.

You’ll need to:

• Open a separate LLC bank account
  
  
• Maintain clean books (we provide services accounting to help with this)
  
  
• File state-specific forms and franchise taxes
  
  
• Keep W9 tax forms for vendors and file 1099 NECs when needed
  
  
• File an FBAR if your rental income flows through a foreign account
  
  

The IRS and courts want to see that your LLC is operating separately from your personal finances. If you co-mingle funds or fail to document income, your protection could be voided.

Need help managing this? We’re a licensed CPA near you with a deep bench of experts including enrolled agents, certified general accountants, and chartered public accountants ready to keep your structure airtight.

Thinking Bigger? Let’s Talk Long-Term Planning

Forming an LLC isn’t just about today, it’s about preparing for tomorrow.

Whether you’re planning a 1031 exchange, transferring properties to your children, or building a real estate brand, your structure matters.

We help clients:

• Build multi-LLC portfolios
  
  
• Navigate SALT deduction limits with pass-through entity taxes
  
  
• Reduce audit exposure
  
  
• Manage multi-state rental tax filings
  
  
• Maximize depreciation and cost segregation strategies
  
  
• Set up trusts or holding companies for legacy planning
  
  

We don’t just check boxes. As one of the most responsive Austin accounting firms, we think about where your business is going and how to get you there faster.

Why Real Estate Investors Choose Insogna CPA

If you’ve ever searched for a “tax advisor near me” and landed on someone who just files returns, congrats, you’ve done the bare minimum.

But if you want more: real strategy, tailored advice, proactive insights, that’s where we come in.

Here’s what sets us apart:

• Deep specialization in rental property tax planning
  
  
• Concierge-level service from a trusted CPA in Austin, Texas
  
  
• A full team of certified public accountants, taxation accountants, and real estate-savvy experts
  
  
• Integrated support for your LLCs, trusts, and multi-entity holdings
  
  

You don’t just get a tax return. You get a roadmap.

Before You File That LLC Paperwork, Let’s Talk

Still wondering whether an LLC makes sense for your situation?

Let’s figure it out together. Schedule a consultation with Insogna CPA, your go-to Austin, TX accountant, and we’ll review your properties, goals, and financial picture to help you make the smartest move for your portfolio.

Because you didn’t build all this just to hand it over to legal fees, tax filings, or avoidable mistakes. You built it for freedom, growth, and peace of mind.

Let’s make sure your structure reflects that...

So, you finally did it. You bought a rental property. Welcome to the world of passive income, appreciation, and… confusing tax rules.

Suddenly, TurboTax is throwing terms at you like depreciation schedules, passive loss limitations, and repair vs. improvement classifications—and let’s be real, you didn’t sign up for this level of accounting homework.

Sound familiar? You’re not alone. Many first-time rental property owners start out thinking they can handle their taxes solo, only to realize that one wrong move could cost them thousands in missed deductions or unnecessary taxes.

The good news? You don’t have to figure this out on your own. At Insogna CPA, a leading Austin, Texas CPA firm, we help rental property owners like you take advantage of every deduction, minimize tax liabilities, and keep more of your hard-earned money. Let’s dive into the biggest rental property tax mistakes and how to avoid them.

The Problem: Rental Property Taxes Are Not as Simple as You Think

Most landlords assume that filing rental income is just like adding another W-2 to your tax return until they realize:

• Depreciation isn’t optional (and skipping it is a huge mistake).
• Not all repairs are deductible right away (some have to be depreciated over time).
• Tracking expenses in a spreadsheet isn’t enough (the IRS loves documentation).
• An LLC isn’t always the tax-saving magic people think it is.

Without a solid strategy, you could end up paying way more than necessary or even making errors that could trigger an audit.

But don’t worry. We’ve got your back.

The Solution: Smart Tax Moves for Rental Property Owners

Here’s how to avoid the biggest tax pitfalls and make sure you’re maximizing your savings.

1. Don’t Miss Out on Rental Property Tax Deductions

The best part about owning rental property? The tax deductions. (Well, that and the extra cash flow.)

Some of the biggest tax breaks for landlords include:
 ✔ Mortgage interest – This is often the largest deduction.
 ✔ Property taxes – Yes, they’re deductible.
 ✔ Repairs & maintenance – Fixing a broken AC? Deductible.
 ✔ Insurance premiums – Rental property insurance = tax break.
 ✔ Travel expenses – If you visit your rental for maintenance or management, you can deduct mileage and travel costs.

What NOT to do: Assume all expenses are deductible right away. The IRS separates repairs (immediate deduction) from improvements (must be depreciated over time). Get this wrong, and you could be overpaying or missing deductions.

How Insogna CPA helps: As an expert Austin tax accountant, we make sure you’re claiming every possible deduction without raising red flags with the IRS.

2. Use Depreciation to Lower Your Taxable Income

Depreciation is like a built-in tax discount for rental property owners. The IRS lets you deduct a portion of your property’s value every year over 27.5 years (for residential rentals).

What you can depreciate:

• The cost of the building (but not the land).
• Certain improvements like HVAC systems, roofs, and plumbing.
• Appliances and furniture used in the rental.

What NOT to do: Forget to claim depreciation. Miss this, and you’re leaving serious money on the table.

How Insogna CPA helps: As a leading CPA in Austin, Texas, we handle all the calculations so you get every dollar you’re entitled to.

3. Supercharge Your Savings with Cost Segregation

Want to accelerate your depreciation deductions and save even more on taxes? Enter cost segregation.

Here’s how it works: Instead of depreciating your entire property over 27.5 years, you separate things like flooring, lighting, and appliances into shorter depreciation categories (5, 7, or 15 years).

Why it’s a game-changer:
 ✔ Boosts your deductions in the early years of owning the property.
 ✔ Reduces your taxable income significantly.
 ✔ Keeps more cash in your pocket for reinvestment.

Who should consider this? Cost segregation works best for properties worth $500,000+, but even smaller properties can benefit.

How Insogna CPA helps: We connect you with cost segregation specialists and ensure the strategy is integrated into your tax return. (No guesswork, just savings.)

4. Should You Put Your Rental Property in an LLC? Maybe.

LLCs are great for liability protection, but they don’t always save you money on taxes.

Here’s why:

• Some states (like California) charge high annual fees for LLCs.
• An LLC doesn’t automatically change how your rental income is taxed.
• Depending on your situation, a different entity structure might be better.

What NOT to do: Assume an LLC is always the best choice without talking to a tax advisor in Austin.

How Insogna CPA helps: We evaluate your specific rental portfolio and recommend the best structure for liability protection and tax efficiency.

5. Work with a CPA Who Specializes in Rental Property Taxes

Let’s be real. DIY tax software isn’t built for real estate investors. It can’t:

• Help you plan for future tax savings.
• Catch errors that could trigger an audit.
• Give you a strategy to minimize taxes as your portfolio grows.

If you own rental property, having the right CPA in your corner is a game-changer.

How Insogna CPA helps:
 ✔ Maximizes your deductions while keeping you IRS-compliant.
 ✔ Helps you avoid mistakes that could lead to overpaying or audits.
 ✔ Gives you a tax strategy that grows with your real estate investments.

Stop Overpaying on Rental Property Taxes—We’ve Got You Covered

Owning rental property is about building wealth, not overpaying in taxes due to missed deductions or poor tax planning.

Let’s make sure you’re keeping more of your rental income where it belongs—in your pocket...

Schedule a consultation today with Insogna CPA, your trusted Austin, TX accountant, and let’s build a tax strategy that works for you!

So, you’ve got rental properties in multiple states—great for building wealth, not so great for tax season. Each state has its own tax rules, filing deadlines, and quirky laws that can turn your simple tax return into a multi-page, multi-state puzzle.

If you’re not careful, you could overpay, miss deductions, or even get hit with penalties. And let’s be real: your money should be going toward growing your investments, not filling state tax coffers.

That’s where we come in. Insogna CPA, a leading Austin, Texas CPA firm, helps real estate investors like you simplify multi-state tax filings, maximize deductions, and avoid expensive mistakes. Here’s why having a specialized CPA in your corner is a must when investing across state lines.

1. Every State Has Its Own (Annoying) Tax Rules

Think tax laws are the same everywhere? Nope.

Some states tax your rental income, some don’t. Some have reciprocity agreements, while others require non-residents to file a return even if you only made a few hundred dollars.

The problem? You could be filing taxes in places you don’t need to or worse, skipping a required filing and racking up penalties.

✔ The solution: A CPA in Austin, Texas (hi, that’s us) who understands multi-state tax laws and makes sure you’re only filing where necessary, saving you time and money.

2. Your LLC Structure Could Be Costing You Thousands

LLCs are great for asset protection but when it comes to taxes? It’s all about strategy.

Here’s where investors go wrong:

• Some states charge franchise taxes just for having an LLC (looking at you, California).
• Others require extra filings and fees for out-of-state LLCs.
• The wrong setup could increase your tax burden instead of reducing it.

✔ The fix: A small business CPA in Austin can help you structure your LLCs the right way, so you don’t end up overpaying in unnecessary state taxes.

3. State Tax Agencies Love Penalties (and You Could Be Next)

Mess up your multi-state filings, and you might get a surprise letter from a state tax agency. (Hint: It’s never a thank-you note.)

Miss a deadline? That’s a penalty.
Forget to report income? Another penalty.
File in the wrong state? You guessed it—penalty.

✔ The solution: A top-rated Austin tax accountant who keeps you ahead of deadlines and in the clear with every state you invest in.

4. Some States Limit Passive Losses (AKA, Your Tax Strategy Needs an Upgrade)

If you’re using passive losses (like depreciation and mortgage interest) to offset rental income, you better hope your state allows it.

• Some states cap how much passive loss you can deduct in a single year.
• Others don’t allow passive loss deductions until you sell the property.

✔ How we help: As an expert tax advisor in Austin, we make sure you’re using every deduction possible while staying compliant with state-specific rules.

5. Without Planning, You Could Pay Taxes Twice on the Same Income

Paying one state its share of taxes is enough. Paying two states? That’s just rude.

Double taxation happens when:

• The state where your property taxes you as a non-resident.
• Your home state also taxes that same income, without giving you a credit.

✔ The solution: A CPA firm in Austin, Texas that ensures you get state tax credits, take advantage of reciprocity agreements, and structure your income smartly to avoid overpaying.

6. A Specialized CPA Saves You Time, Money & Headaches

Let’s be real: multi-state tax laws aren’t something you want to Google at 2 AM.

A specialized Austin accounting firm makes sure you’re:

• Optimizing your tax strategy for multiple states.
• Never missing a deadline.
• Maximizing deductions so you keep more of your rental income.

Hiring a specialized CPA isn’t just about compliance, it’s about keeping more money in your pocket while making tax season stress-free.

Multi-State Taxes Don’t Have to Be a Nightmare

Managing rental properties across different states shouldn’t mean spending hours trying to figure out tax laws. Let’s make it simple.

Schedule a consultation today with Insogna CPA, your trusted Austin TX accountant—and let’s get your multi-state tax strategy dialed in...