Accounting for Real Estate in Austin
REAL ESTATE ACCOUNTING & Advisory in Austin
At Presti & Naegele, our real estate accounting team brings decades of experience supporting property owners through the ups and downs of the market. In Austin, we work with investors across a broad spectrum of real estate assets—from co-ops and apartment buildings to commercial centers, office spaces, industrial properties, and new residential developments.
We provide accounting strategies designed to help Austin property owners grow sustainably while maintaining reliable income. Real estate continues to be a strong investment option, offering consistent returns along with tax benefits like depreciation. Whether you're managing rentals in South Congress or overseeing mixed-use properties near The Domain, our real estate accounting in Austin is built to align with the city’s fast-paced and diverse property environment.{{
CHOOSING THE RIGHT BUSINESS ENTITY FOR Austin
REAL ESTATE OWNERSHIP
Presti & Naegele assists real estate investors across Austin with determining the ideal legal structure for managing rental holdings. The right entity can reduce liability and improve operational efficiency.
✔ A Limited Liability Company (LLC) provides the flexibility of a sole proprietorship combined with the legal protections of a corporation. For those using real estate accounting in Austin, LLCs are a reliable option for tax benefits and asset protection.
LLCs allow rental income to pass directly to your personal tax return, eliminating corporate tax obligations. Property-related expenses like repairs and interest can also be deducted. In Austin’s dynamic property market, forming an LLC can boost your reputation with tenants and partners. Many investors prefer LLCs for their simplicity and protection, while certain active professionals may consider S Corporations for added shareholder advantages.
Legal Structure:
How real estate owners pay taxes depends on the structure of their business. At P&N, we can evaluate your situation and recommend the right entity for your business.
Sole Proprietorship – A sole proprietorship is the simplest form of business, where the owner and the business are one.
Limited Liability Company (LLC) – An LLC combines the liability protection of a corporation with the flexibility of a partnership.
Partnership – A partnership involves two or more individuals or entities sharing ownership and responsibilities.
S-Corporation – An S-Corporation is a pass-through entity that combines features of
corporations and partnerships.
C-Corporation – A C-Corporation is a separate legal entity owned by shareholders. It’s the most complex structure.
UNDERSTANDING ACCELERATED DEPRECIATION in Austin
Our Real Estate CPAs help Austin investors leverage accelerated depreciation—a valuable tax strategy that provides greater deductions earlier in the property’s life.
Depreciation is used to reflect property wear and aging. While standard residential depreciation spans 27.5 years, accelerated depreciation allows Austin property owners to take larger deductions sooner, reducing early-year taxable income.
How Does Accelerated Depreciation Work?
Passive activity refers to a business or investment where the taxpayer doesn’t participate in daily operations. When these activities generate more expenses than income, passive activity losses (PALs) are created.
In Austin, rental income is usually treated as passive. Expenses like depreciation, maintenance, interest, and insurance contribute to passive losses. This also applies to real estate ventures in the Austin area with minimal investor involvement.
Components Subject to Accelerated Depreciation: Certain components—such as appliances, flooring, landscaping, and fencing—may be fully depreciated within the first 5 to 7 years.
Tax Benefits of Accelerated Depreciation
- Reduced Taxable Income: Accelerated depreciation lowers taxable income, resulting in immediate tax savings.
- Cash Flow Boost: By claiming accelerated depreciation, investors free up more cash for other purposes, such as property improvements or scaling their portfolios.
PASSIVE ACTIVITY LOSSES
Passive activity refers to a business or investment where the taxpayer doesn’t participate in daily operations. When these activities generate more expenses than income, passive activity losses (PALs) are created.
In Austin, rental income is usually treated as passive. Expenses like depreciation, maintenance, interest, and insurance contribute to passive losses. This also applies to real estate ventures in the Austin area with minimal investor involvement.
- Offsetting Income: Passive losses can only offset passive income. In other words, you can use these losses to reduce taxes owed on other passive income sources.
- Limitations: However, there are limitations. If you and your co-owners have passive income from other sources, the losses generated by the rental activity may be used to offset that income.
Exceptions to the passive loss rules include:
- $25,000 Allowance: If you actively manage the real estate and earn less than $100,000 during the year, you can deduct up to $25,000 in passive losses against ordinary income.
- Real Estate Professionals: Real estate professionals who materially participate in their real estate activities are not subject to the same passive loss rules. They can use real estate losses to offset income from other active sources.
Material participation is a key factor. If you actively manage the real estate (e.g., handle day-to-day operations), your losses may not be strictly passive. Real estate professionals who meet specific qualifications can also avoid the passive loss treatment.
1031 EXCHANGE
A 1031 exchange—or like-kind exchange—is a method used by Austin real estate investors to defer capital gains taxes by reinvesting sale proceeds into another qualifying property.
When you sell an investment property in Austin and reinvest the earnings into another property of similar use, a 1031 exchange can delay capital gains tax. A qualified intermediary must hold the funds during the process to remain compliant. “Like-kind” means the properties must serve a similar investment role—not that they must be identical—such as trading a retail center for raw land or an apartment building for a warehouse.
Austin investors can repeat this process to grow their portfolios while deferring taxes until a final cash sale. In certain scenarios, even a previous residence may qualify under specific conditions.
Strategic Advisory for Real Estate Growth in Austin
Succeed in Austin’s booming real estate market with expert guidance from our Real Estate CPAs. Our real estate accounting services in Austin help investors identify opportunities, apply tax strategies, and manage their properties with clarity. Presti & Naegele supports property owners across Austin with dependable, results-driven accounting.
STREAMLINE FINANCIAL OPERATIONS WITH QUICKBOOKS EXPERTISE
For Austin property owners, accurate financial management starts with solid bookkeeping. Our QuickBooks services are designed for real estate investors, giving you streamlined access to organized financial data across all your properties. With our real estate accounting in Austin, you can stay focused on growing your portfolio.
TRANSFORM YOUR Austin REAL ESTATE VENTURES WITH PRESTI & NAEGELE EXPERTISE
Elevate your success - Schedule a consultation with a Real Estate CPA today and unlock the full potential of your property investments.
For inquiries or expert guidance, contact Presti & Naegele Accounting Offices. Your success awaits!
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WHAT OUR CLIENTS ARE SAYING
I have had my business for more than 10 years and struggled through several *truly awful* accountants in the early years. I found Presti & Naegele about five years ago and have never looked back. They are a life-changing breath of fresh air and they will be my accountants for as long as I live. Donald Sager brings me confidence, peace and calm in an area of the business that would otherwise be stressful. He knows what he's doing and is always extremely responsive and ready with a plan of action and to explain anything at all. I am so grateful for him!
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