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SJ Accounting Services LLC. CPA, Virtual CFO & Tax Strategist. Revolutionizing the way you manage your business & finances.

10/19/2026

Selling a rental doesn’t always free every suspended loss at once.

Passive losses you couldn’t deduct generally carry forward and may offset future passive income while you continue to own the property.

If you sell your entire interest in a fully taxable sale to an unrelated buyer, remaining suspended losses are generally released and may offset income beyond the sale. A partial sale usually doesn’t trigger the same full release; some losses may remain suspended. With an installment sale, the release may be spread over the years gain is recognized.

Before a sale, check that your passive-loss carryforward schedule is current. Knowing the balances by activity can help you understand the tax timing and plan the transaction.

For year-round tax planning for real estate investors, it can help to review the numbers before a sale is underway. Outcomes vary based on facts and circumstances, and tax rules change. Educational content only; not tax or legal advice.

10/16/2026

A higher 1099 threshold doesn’t mean vendor tracking can wait until January.

For 2026 payments, the threshold for certain information returns, including Form 1099-NEC for reportable nonemployee compensation, rises from $600 to $2,000. If you must file 10 or more information returns in total, across form types, you generally must e-file.

Example: A property manager pays the same landscaping contractor 12 invoices of $185. Each invoice is small, but the $2,220 annual total may put the vendor over the reporting threshold. Tag payments to the vendor and property in your ledger throughout the year so the total is easy to review.

A few practical checks:
• Decide worker status based on the actual working relationship, not just a contract or W-9.
• Collect a completed W-9 before paying a new contractor.
• Track service fees separately from documented materials or reimbursements; don’t assume reimbursements are automatically excluded.
• Many payments to corporations are generally exempt, with exceptions. Payments by payment card or qualifying third-party networks generally have separate 1099-K reporting handled by the processor.

Review vendor records and W-9s before year-end. Clean, property-level books can make filing far less of a scramble.

Figures are illustrative. Rules can change, and reporting obligations depend on the facts and circumstances.

10/14/2026

Could your real estate entity change where its state tax deduction lands on the federal return?

Some states allow partnerships, LLCs taxed as partnerships, and S corporations to elect a pass-through entity tax (PTET). When the election and payment meet applicable rules, the entity may deduct the tax federally rather than having owners claim it as personal state and local tax, where the SALT cap may limit the deduction.

For 2026, the SALT cap is $40,400 and begins phasing down above roughly $505,000 of modified AGI. But a PTET election isn’t automatically beneficial. State availability, annual election deadlines, owner type (individual, trust, or corporation), nonresident owners and composite filings all matter. The entity-level deduction may also affect the owners’ qualified business income (QBI) calculation.

Example: If a partnership is considering a $28,000 PTET payment, it should model the federal deduction, state credits to owners, and cash timing, not assume the payment equals tax savings. Good records should capture the entity tax accrual, owner credits, K-1 reporting, and any estimated-tax adjustments. Forecasting cash needs before the election deadline can help avoid surprises.

Consider reviewing the state rules and owner-by-owner impact with your tax professional before electing. Figures are illustrative, not individualized tax, accounting, legal, or investment advice. State rules and federal thresholds change, and outcomes vary with facts and circumstances.

10/12/2026

You sold a rental with a carry-back note. So why does your income statement show a fraction of the gain?

When a seller finances the buyer, the installment method generally spreads gain across the years payments are received. The gross profit percentage is applied to principal collected, rather than recognizing the entire gain at closing.

Example: A $600,000 sale, less $35,000 selling costs and a $265,000 adjusted basis, produces $300,000 of gross profit. At a 50% gross profit percentage, a $150,000 down payment produces approximately $75,000 of gain recognized in year one; the remaining gain is deferred as the note is collected.

Bookkeeping matters: record the note receivable, split each payment between principal and interest, and maintain a deferred-gain schedule that reconciles to the annual installment-sale reporting, such as Form 6252. The tax return and the property’s books can legitimately tell different stories in year one.

The note should carry an adequate stated interest rate. A below-market rate may trigger imputed interest under applicable federal rate rules. Some gain components may not spread and may be recognized in the sale year, depending on the facts. Frequent, dealer-like selling can produce ordinary income and may jeopardize installment treatment. A 1031 exchange defers gain rather than spreading it.

Before year-end, consider reviewing carry-back note structures, note-receivable tracking, and deferred-gain schedules with SJ Accounting Services LLC’s virtual CFO or virtual controller team. Figures are illustrative, not individualized tax, accounting, legal, or investment advice; outcomes vary with the facts and circumstances.

10/09/2026

Your investors got their distribution. So why is their capital account down?

Distributions and profits are different numbers. A partnership can distribute more cash than its book income, reducing an investor’s capital account even though cash went out the door.

Example: A 20-unit multifamily partnership has $1,500,000 of investor equity. In year one, the property produces $150,000 of net operating income before depreciation. After $72,000 of depreciation, book income is $78,000. The partnership distributes $120,000. The extra $42,000 is a return of capital. Cash out, but capital accounts down.

An investor receiving a $10,000 distribution may see their capital account decline while their K-1 shows modest income. That can look like an error until the capital-account rollforward shows beginning balance, contributions, income or loss allocations, distributions, and ending balance.

A common reporting failure is building investor statements from a bank balance in a spreadsheet instead of reconciled partnership books. Allocations, depreciation, and capital accounts then fail to tie. Unclosed books also delay K-1s, affecting investors’ personal returns and extension planning.

A repeatable quarterly package should include a capital-account rollforward, cash-flow summary, reserves held, distributions paid, operating results versus budget, and an updated distribution outlook. Partnership-level books should maintain separate capital accounts, follow the operating agreement, and document reserve targets for capital work and debt service before distributions are declared.

Preferred returns, promote or carried interest, and non-pro-rata distributions can change outcomes.

SJ Accounting Services LLC provides Virtual CFO and Virtual Controller support for partnership bookkeeping, capital-account rollforwards, investor reporting, and K-1 readiness.

Figures are illustrative and not individualized tax, accounting, legal, or investment advice. Need a clearer reporting process? Let’s discuss what your partnership needs.

Your construction loan converted. So why does the permanent lender say your project costs don’t match your books?Convers...
10/07/2026

Your construction loan converted. So why does the permanent lender say your project costs don’t match your books?

Conversion typically follows a certificate of occupancy, stabilization/occupancy threshold, or DSCR test. Before it, the permanent lender, and often the construction lender, requires cost certification: final cost by code, tied to the approved budget and original sources-and-uses, with paid invoices, final lien waivers, and a reconciled last draw.

Why the gap? Developers tracked draws, not a true budget. Causes include unpapered change orders; inconsistent capitalization of construction interest and fees; soft costs such as design, permits, impact fees, legal, and insurance misallocated or placed in one bucket; unsupported contingency; unreleased retainage; and commingled owner and contractor contingencies.

Example: A 12-unit project had a $3.1M budget and $450K interest reserve. Certified cost was $3.18M: $52K in lender-unreported change orders plus $28K in interest posted to project costs instead of the reserve. The build was essentially on budget, but documentation and classification delayed conversion for weeks.

Fix it with project-level books, cost codes mapped to the budget and lender schedule of values, and monthly budget-versus-committed-versus-actual reporting with projected cost to complete. Delays can extend construction-rate interest and jeopardize rate-lock or loan-term deadlines.

Reconcile before conversion. SJ Accounting Services LLC offers Virtual CFO and Virtual Controller support for project accounting, budget-to-actual cost-code reporting, cost-certification preparation, interest-reserve and retainage tracking, and lender or investor reporting.

Figures are illustrative, not individualized tax, accounting, or legal advice.

10/05/2026

Two identical rentals. One claims the 20% deduction. The other can't.

Tax law doesn't ask whether you own real estate. It asks whether you're in the business of it.

The 20% qualified business income (QBI) deduction is one of the few breaks written for pass-through owners, and rental real estate can qualify. But a single property held quietly in the background while you work a full-time job usually looks like an investment, not a trade or business, and an investment doesn't get the deduction.

What tends to move a rental portfolio toward "business":
- A real record of hours (tenant screening, repairs, inspections, vendor coordination, bookkeeping) not just depositing rent
- Written leases, dedicated bank accounts, and property-level books
- Regular, continuous effort across the year (a shoebox of receipts in December won't do it)

What to do before year-end: start a simple contemporaneous log, date, hours, activity. A record kept weekly is worth far more than one reconstructed in March.

Illustrative example: three rentals, $75,000 of combined net rental income, actively managed by an owner who logs roughly 520 hours during the year. If the activity qualifies, a 20% deduction could shelter up to about $15,000 of that income: subject to taxable income thresholds and, for higher-income owners, wage and capital limits. Same three properties, no hours and no records: potentially $0.

If you hold rentals through an S-corporation or pay yourself W-2 wages, reasonable compensation affects both sides of that calculation, which is why structure and deduction planning should happen together, not in April.

Figures are illustrative and not individualized tax, accounting, or legal advice. Outcomes vary with facts, participation, entity structure, and income level.

Wondering whether your rentals can qualify? We're happy to review your participation, records, and structure before year-end.

10/02/2026

Q4 is budget season for rental portfolios, but your rent didn’t drop. So why did the portfolio miss its number?

Build the annual operating budget at the property level. For developers, use cost codes. Start with prior-year actuals, then account for known changes in taxes, insurance, utilities, planned turnover, scheduled capital work, and expected vacancy or credit loss.

A budget is a set of expectations to measure, not a wish.

For example, a 14-unit residential portfolio budgeted $210,000 in gross rent, but actuals came in at $198,000. Two longer-than-planned turnovers and one collection loss drove the $12,000 shortfall. Repairs were budgeted at $22,000 but reached $31,000 after two HVAC replacements landed in the same quarter.

Reviewing variance by property, not just portfolio totals, shows whether the problem is widespread or concentrated in one property.

Each month, flag variances that exceed both a percentage and dollar threshold. Separate timing variances from permanent cost changes. That gap directly affects owner distributions, lender covenant reporting, and next year’s capital plan.

Catching a permanent variance in month 4 instead of month 11 can protect distributions and prevent a year-end surprise.

SJ Accounting Services LLC provides Virtual CFO and Virtual Controller support for real estate businesses, including property-level budgeting, monthly variance reporting, and forecasting. Reach out if this would help your team.

Figures are illustrative and not individualized tax, accounting, or legal advice.

09/30/2026

Your build is on budget. So why is the lender holding your draw?

Many developers use one operating account and company-wide P&L. Lenders fund by project, using a schedule of values and cost codes. That mismatch can delay or reduce draws.

A lender-ready monthly package connects budget to actual by cost code, ties the current draw to the schedule of values, and includes invoices, paid receipts, subcontractor lien waivers, and separately tracked retainage.

Retainage matters: if 10% withheld from subs is buried instead of recorded as a liability, the project can look more complete and profitable than it is. Approved change orders belong in the books as they happen; unapproved changes create overruns the draw cannot support.

Illustrative example: An 8-unit project has a $2,400,000 budget, 5% contingency ($120,000), and 30-day draws. Site utilities and framing run $34,000 over; roofing, HVAC and landscaping are $41,000 under. The project is $7,000 under overall, but the lender sees overruns first and asks questions unless the package reconciles by code. Clean job-cost books can make reconciliation a day instead of a week and show projected cost to complete, not just historical spend.

That same data supports monthly partner and investor reporting: budget, committed costs, actuals and projected cost to complete.

SJ Accounting Services LLC provides Virtual Controller support for developers and owner-builders, including project-level job costing, draw packages, retainage and change-order tracking, and lender or partner reporting. Contact us to discuss your process.

Figures are illustrative; results vary. This is not individualized tax, accounting or legal advice.

09/28/2026

The tax bill on a rental sale may have started years ago.

When you sell rental real estate, years of depreciation deductions can return as unrecaptured Section 1250 gain, taxed federally at up to 25%, even if the deductions were not claimed. “Allowed or allowable” depreciation generally reduces your tax basis either way.

Example:
• Purchase price: $520,000
• Capital improvements tracked in the books: $60,000
• Depreciation allowed or allowable: $150,000
• Selling price: $700,000
• Selling costs: $20,000

Adjusted basis is approximately $430,000 ($520,000 + $60,000 − $150,000). The estimated gain is $250,000. Up to $150,000 may be unrecaptured Section 1250 gain, potentially creating a federal tax exposure of up to $37,500 before considering other tax factors.

This is why bookkeeping records matter. Invoices, closing statements, improvement dates, and project costs help support capitalized improvements and protect the basis you are entitled to claim. Missing records can make it harder to substantiate basis and may increase taxable gain.

Before listing a rental property, review your depreciation schedule and improvement records with your tax professional. Early planning can help you understand the numbers before a sale is final.

Figures are illustrative; results vary. This is not individualized tax or legal advice.

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