When you’re looking at the adjusted basis of your assets, what you need to look for is the cost of your asset after it has been adjusted based on different tax issues. Tracking the adjusted basis of your properties has a couple of benefits for your real estate firm. One reason for you to do this activity is that the higher the adjusted asset is, the less one has to pay in capital gains tax when sold.
However, a drawback of tracking assets basis when doing your real estate firm bookkeeping is that some adjustments can reduce the basis of an asset. This is not something you would typically want, especially at tax time. A crucial part of real estate firm tax planning is understanding capital gains and capital losses. Our seasoned real estate accountants can help you create effective real estate tax planning strategies to avoid these issues.
Understanding How to Calculate Adjusted Basis
The calculation of the adjusted basis of your property starts with the purchase price of your asset. Afterward, the basis can be increased by including the amount spent on improving the asset. This amount can even include money that is paid for legal fees needed for the purchase or sale of the item. You will then deduct amounts you previously claimed as tax deductions for the asset, such as casualty losses, theft losses, or depreciation.
Let’s have a case study to help you further understand the adjusted property basis for your assets. You’re selling a real estate investment property that hasn’t been lived in for the required number of years; this may qualify for capital gains tax exclusion. In this scenario, the basis would be the amount of money you paid for the real estate. You would then include the total amount spent to improve the home and other fees connected to the sale of the property.
Let’s say that you, the property owner, has been depreciating the property in your annual tax returns from the time that they have owned it until when you want to sell it. In this scenario, you may be able to recoup those deductions by subtracting them from your basis. This deduction is after all of the costs mentioned above have been added.
There is one major factor that you should consider is the cost basis. This is the price you paid for the real estate investment, which includes the cash that you paid upfront, debt obligations you made with relation to the purchase of the asset, and other amounts you paid like:
Other amounts that you can typically deduct from the cost are:
Section 179 deductions
Some vehicle credits
Residential energy credits
Rebates treated as adjustments to the sales price
Adoption of tax benefits
Gas guzzler taxes
STRATAFOLIO & Quickbooks Online Real Estate Accounting Integration
Tracking the adjusted basis of every single one of your assets can be extra tricky due to your busy schedule. Fortunately, by integrating STRATAFOLIO with Quickbooks, you can easily monitor all the factors that may affect the adjusted basis of your real estate investments.
Purchased assets that are recorded in STRATAFOLIO can be automatically synchronized to your Quickbooks Online file. This feature not only eliminates the need for double entries but also assists with assuring that your total asset costs are accurate. Quickbooks also lets you tag expenses such as improvements and taxes to their related assets to help you compute the adjusted basis of your assets when the need comes.
STRATAFOLIO’s CAM Tracking feature allows real estate investment firms like yours to monitor the taxes, CAM (Common Area Maintenance) expenses, and insurance expenses, which affect the adjusted basis of your assets. An integrate STRATAFOLIO and Quickbooks accounts will give you all the features you need to compute the adjusted basis of your assets correctly.
At Fusion CPA, our real estate firm financial advisers offer real estate firm CFO advisory services, including helping our clients understand how to make the best of their STRATAFOLIO and QuickBooks online programs. We can you how these platforms can help you manage lease price escalations, aggregate data, and information drill-downs. Our real estate firm accountants can also help you view your cash flow in QuickBook and STRATAFOLIO’s automated dashboards. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.