Accounting for Real Estate in Dallas

Presti & Naegele works with real estate investors across Dallas to determine the right business structure for their property holdings. Setting up a legal entity helps protect assets and improve flexibility in managing your investments.

✔ A Limited Liability Company (LLC) provides the operational simplicity of a sole proprietorship along with the personal asset protection of a corporation. For investors using real estate accounting in Dallas, forming an LLC is a smart way to reduce personal liability while benefiting from adaptable tax options.

With an LLC, your rental income goes directly to your personal return—eliminating corporate taxation. You’re also able to write off qualified property-related expenses, such as mortgage interest and repairs. In Dallas, where the real estate market is both active and competitive, using an LLC can enhance your professionalism and credibility. LLCs remain a popular choice for their flexibility and liability protection, though certain real estate professionals may also explore S Corporations for added structure and tax 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.

UNDERSTANDING ACCELERATED DEPRECIATION in Dallas

Dallas property owners can benefit from strategies that optimize their tax position—and accelerated depreciation is one of the most effective tools available. Our Real Estate CPAs help clients understand and apply this approach to strengthen their portfolios.

Depreciation spreads out the cost of a property over time, accounting for aging and loss of value. Residential rental properties typically depreciate over 27.5 years, but accelerated depreciation allows Dallas investors to front-load deductions, leading to earlier tax relief.

How Does Accelerated Depreciation Work?

Passive activities refer to investments in which the taxpayer doesn’t materially participate. When the expenses from these activities exceed the income they generate, passive activity losses (PALs) occur.

Rental income in Dallas is usually categorized as passive. Common costs—like loan interest, upkeep, insurance, and depreciation—can result in passive losses. This also applies to real estate ventures or partnerships in the Dallas area where involvement is limited.

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.

Selling an investment property in Dallas and reinvesting in another similar property allows you to defer capital gains tax under a 1031 exchange. The funds from the sale must be held by a qualified intermediary—you can’t receive them directly. “Like-kind” refers to properties used for similar investment purposes, not necessarily identical types—such as exchanging an apartment building for a warehouse or a commercial retail unit for undeveloped land.

Dallas investors can repeat the 1031 exchange process to continue expanding their portfolios without triggering tax liability. Taxes become due only when a property is eventually sold for cash. Under certain guidelines, even a former residence might qualify.

Strategic Advisory for Real Estate Growth in Dallas

Achieve long-term success in Dallas’s competitive real estate scene with help from Presti & Naegele. Our real estate accounting services in Dallas are built to support local investors with expert guidance, market insight, and practical strategies. Work with our dedicated Real Estate CPAs to make confident, informed decisions and manage your properties more effectively.

STREAMLINE FINANCIAL OPERATIONS WITH QUICKBOOKS EXPERTISE

Accurate bookkeeping is a must for real estate investors in Dallas. Our QuickBooks services are designed specifically for property owners, helping you stay organized and in control. With real estate accounting in Dallas from Presti & Naegele, you’ll have reliable financial records across all your holdings, freeing you up to focus on growth and operations.

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