Folsom, CA Accountant for Real Estate Developers
Cook CPA Group
Real estate developers have a lot to consider as they do their jobs. Not only do real estate developers have to manage and follow through on all of the details that go into the construction of sturdy structures while understanding zoning laws and the demands of public approval, they have to do all of that while maintaining accurate bookkeeping and fully understanding the tax laws that affect them.
Accounting for real estate developers doesn’t have to be difficult. Real estate developers can use the aid of licensed CPAs to help them manage their finances, no matter how complicated and varied they may be. Get in touch with us today to learn more about how Cook CPA Group can help your real estate development company maintain financial health.
Utilizing Like-Kind Section 1031 Transfers
A 1031 transfer, also known as a “like-kind” exchange or a Starker exchange, means that a taxpayer can defer taxes on the increase in value on a property (“capital gains”) that they’ve exchanged for another. This applies as long as the properties are of a “like kind,” which means that they are of the same nature, character, or class, and usually only applies to business or investment properties. A property can be used in a like-kind exchange, however, if the property was used as the taxpayer’s primary place of residence for a minimum of two years (that can be two years total; it does not have to be consecutive).
Section 1031 transfers are frequently utilized by real estate developers and construction companies. This part of the tax code is intended to allow proceeds on properties to be reinvested into a property of a similar type. Section 1031 was originally part of the Tax Cuts and Jobs Act, passed in 2017, and it essentially allows real estate developers to reduce their tax liability. It frequently requires the assistance of a third party. A CPA at Cook CPA Group can help real estate development companies make sure that they use like-kind 1031 transfers with minimal of penalty or complication.
How the Tax Cuts and Jobs Act of 2017 Affects Accounting for Real Estate Developers
The Tax Cuts and Jobs Act was passed in 2017 and made an impact on the taxation methods in various industries. This includes the real estate industry. This act was responsible for the lowering of the corporate tax rate from 35% to 21% across all industries, but certain regulations that were a part of the Tax Cuts and Jobs Act of 2017 affect the real estate development industry specifically. These include:
- Deductions on taxable income: A change to a deduction rate of 20% on taxpayers’ taxable income was a notable part of the Tax and Jobs Act. In order to qualify, taxpayers must have no more than $157,000 in taxable income, and no more than $315,000 if the return is filed jointly. Developers can find ways to lower their income so that they qualify for this deduction, including the use of charitable contributions and transfers to retirement accounts. A CPA can help with this.
- Alterations to bonus depreciation: With bonus depreciation, real estate developers and other taxpayers are able to invest in business properties and then have them be capitalized upon and depreciated over the course of the life of the property. This allows a developer to write off, within the first year, a property that depreciates in less than 20 years. In order to qualify, a developer or taxpayer must not use the property for personal use or have received the property from a corporation subsidiary, and the property must not have been transferred from any party related to the developer or taxpayer.
Payroll Taxes for Employees of Real Estate Development Companies
Real estate development companies often employ a bevy of people to help them implement their construction plans. As an employer, these companies must pay payroll taxes (also known as employment taxes or trust fund taxes), which is an important aspect of the financial health of a real estate development company.
The consequences for not properly handling payroll tax obligations can be steep. If payroll taxes are not paid correctly, it’s possible that business owners may have their accounts frozen or have other restrictions placed on them, which can hurt their bottom line.
CPAs can assist real estate development companies with all of their needs pertaining to employee payroll taxes, as well as with audits, consulting, and other tax services.
Our Licensed Folsom CPAs Can Help Your Real Estate Development Company
The experienced Folsom, CA, CPAs at Cook CPA Group are ready to help your real estate development company with all of its accounting needs, regardless of how complicated they may be. The accountants at Cook CPA offer decades of experience while doing accounting for clients, and they can ensure the same level of commitment and expertise for your real estate development company. Call us today at (916) 259-5289 or visit our website to set up an appointment for a free consultation.