Tax season is upon us! At MLG Capital, we know how important the benefits of tax can be for real estate investments. It’s important to us that our investors understand these benefits and how they may be able to use them to their advantage. This article provides a 2023 tax overview for real estate investors to better equip themselves for a successful tax filing year now and for years to come.
Please note that the information provided in this article is not to be considered tax, legal or financial advice and MLG and the authors do not represent any recipient of this article. Please consult your tax professional regarding your personal tax situation.
Tax Estimates:
Throughout the 2023 tax year, you may have had tax estimates distributed to you or your financial professional (or both). As a passive investor, this will be a key starting point in understanding what your tax exposure looks like for 2023. For MLG Investors, we take great pride in issuing our tax estimates by December 31st each year. This is completed so that you and your tax advisors can plan accordingly as you await your formal K1s.
Capital Gain and Loss:
For real estate investors, 1231 capital gains from property sales may be one of the bigger highlights from the reporting year. 1231 capital gains are generated from depreciable property and real property used in a business and held for more than one year. These taxes are paid by investors upon selling an asset and are calculated based on how much the asset has changed in value during the time it was held.
One key item to look for in your year-end 2023 tax estimates are any capital gains being passed through to you. If capital gains are included in your estimates, please consult with your tax advisor to ensure appropriate steps are being taken to record and track the capital gains on your personal returns for the 2023 tax year.
As a reminder, long-term capital gains (1231 Gains on an MLG K-1s) are taxed at more favorable rates than ordinary income. The table below shows the various 2023 tax rates based on taxable income for individuals:
Once estimates have been received and applied to your 2023 tax picture, it is key to understand when your Federal and State K-1s will be distributed to you. For MLG investors, we target our K-1 distribution by the end of March each year. The timing of this crucial tax form can dictate whether an extension on your returns is necessary before the Federal deadline of 4/15/2024 and various state deadlines.
If you expect K-1s from other investments to come in later than this timeframe, please consult with your tax preparer to develop a strategy for making sure extensions are timely filed. Failure to file returns timely may result in penalties.
For many MLG investors, a few relevant extension dates are as follows:
Wisconsin:
- If your federal return has a valid extension, your Wisconsin return will be automatically extended through October 15, 2024
Minnesota:
- Extension Due: 4/15/2024 (Extends return through October 15, 2024)
- Note: Minnesota tax return is only required if you expect to owe Minnesota tax – please consult with your tax advisor
California:
- Extension Due: 4/15/2024 (Extends return through October 15, 2024)
- Note: California tax return is only required if you expect to owe California tax – please consult with your tax advisor
Illinois:
- Extension Due: 4/15/2024 (Extends return through October 15, 2024)
- Note: An Illinois tax return is only required if you expect to owe Illinois tax – please consult with your tax advisor.
Please visit the applicable state’s Department of Revenue (or equivalent taxing authority) website for relevant tax information. Please note that these dates may vary annually; it is advisable to seek guidance from your tax advisor.
Tax season can be easier with the right approach. Appropriate planning and discussions with your tax advisor will assist in making your 2023 tax filings less burdensome. For current MLG investors, please do not hesitate to reach out to our Investor Relations Team with any questions.
If you’re interested in investing with us, look to our current Private Fund offering.
The author(s), MLG Capital, its representatives, employees, officer, directors, members, respective partners, agents and its affiliates (“MLG”) do not represent any recipients of this article (“Recipients”) and all statements made by MLG shall not be considered tax, investment or legal advice. Recipients shall consult with their own tax, investment or legal professional regarding their personal financial and tax situation and its relation to the information presented in this article. This article does not constitute an offer or solicitation in any state or other jurisdiction to subscribe for or purchase limited partnership interests in an offering or a security. An investment into a private offering or other security are subject to various risks, none of which are described herein. Recipients of this article agree that MLG shall have no liability for any misstatement or omission of fact or for any opinion expressed herein.
Tyler Taves is MLG Capital’s Senior Compliance Manager. He is responsible for all tax compliance and reporting across MLG Capital’s fund structures and corporate entities
Jim Eisenhauer is a Senior Tax Accountant at MLG Capital. He assists with tax compliance and reporting across MLG Capital’s fund structures and corporate entities.
