Every spring, I watch the same scene play out. Real estate investors scramble to gather receipts, chase down 1099s, and hand everything to their CPA with one prayer: please don’t let me owe too much. Then they sign the return, write a check, and move on — until next April, when the cycle repeats.
Here’s the hard truth: if the only time you think about taxes is during tax season, you’re almost certainly leaving money on the table. Serious money.
After helping tens of thousands of real estate professionals structure their businesses and optimize their tax positions, I can tell you the single biggest difference between investors who build lasting wealth and those who plateau isn’t deal flow or market timing — it’s how they approach taxes. The wealthiest investors don’t treat taxes as a bill to pay. They treat them as a lever to pull.
Filing Is Not Strategy
There’s a critical distinction most investors miss. Tax filing is backward-looking. It documents what already happened. Tax strategy is forward-looking. It shapes what will happen. When you wait until April to think about your tax position, you’ve already locked in your outcome. The deductions you didn’t take, the entity you didn’t form, the income you didn’t time properly — none of that can be undone after December 31.
The investors who consistently pay less in taxes aren’t gaming the system. They’re simply planning ahead.
Where Most Investors Go Wrong
In my experience, the costliest mistakes aren’t dramatic. They’re quiet. They’re the things investors don’t realize they’re missing.
Holding everything in one entity, or no entity at all. I regularly meet investors who own all of their properties inside a single LLC, or worse, in their personal name. This creates unnecessary liability exposure and eliminates opportunities for tax optimization. The right structure depends on your portfolio, your income sources, and your long-term goals, but getting it wrong can cost you thousands every year.
Treating every dollar the same. Not all real estate income is taxed equally. Rental income, flipping income, and capital gains each carry different tax treatment. If you’re not structuring your activities to account for these differences, you’re likely overpaying.
Ignoring year-end planning. The most powerful tax moves happen in October, November, and December — not April. Timing a purchase, accelerating a deduction, or making a strategic retirement contribution before year-end can materially change your tax liability. Yet most investors don’t have a single planning conversation before the year closes.
Working with the wrong advisor. A good CPA can file an accurate return. A great tax strategist can help you restructure your entire approach to keep more of what you earn. These are not the same thing, and knowing the difference matters.
Five Moves to Make Right Now
Regardless of where you are in your investing journey, these steps will put you in a stronger position:
1. Audit your entity structure. If you haven’t reviewed how your properties and business activities are organized in the last two years, it’s time. The right combination of LLCs, S Corps, and holding companies can create meaningful tax savings and asset protection.
2. Separate your activities. Keep rental operations, flipping operations, and management activities in distinct entities where it makes sense. This isn’t just about liability — it directly affects how your income is taxed.
3. Schedule a mid-year tax projection. Don’t wait for your annual return to learn what you owe. Ask your CPA for a mid-year review, giving you six months to adjust. If they don’t give you the time, reconsider if they are the right CPA for you.
4. Maximize every deduction you’ve earned. Cost segregation, bonus depreciation, home office deductions, travel, professional development, if you’re not tracking these methodically, you’re giving money away.
5. Build a team, not just a rolodex. Your CPA, attorney, and tax strategist should be communicating with each other. Fragmented advice leads to fragmented results.
The Bigger Picture
Real estate is one of the most tax-advantaged asset classes in America. The tools are there — depreciation, 1031 exchanges, opportunity zones, pass-through deductions. But tools don’t work if they sit in the toolbox.
This tax season, instead of just surviving the filing deadline, use it as a catalyst. Look at your return not as a final answer, but as a diagnostic. What does it reveal about your structure, your planning, and your team?
The investors who build generational wealth don’t just invest well. They plan well. And that planning starts long before April 15.
Tommy Thornburgh is President of PRIME Corporate Services, where he and his team help real estate investors nationwide build tax-optimized business structures. Learn more at https://primepartner.info/thinkrealty
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