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Depreciation, cost segregation and 1031 exchanges can save real estate investors a lot of tax. Most of these benefits depend on whether you qualify, when you act, and what records you keep.
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We plan purchases, depreciation and cost segregation, help you qualify for real estate professional or short-term rental treatment where it fits, and plan sales and 1031 exchanges. We also set up the records that support each position, so the deductions you take hold up.
Ownership and entity structure decided before you buy, and why an LLC alone won't lower your taxes.
Whether a cost segregation study will pay off, and how to time it with bonus depreciation.
Real estate professional status, short-term rental rules, material participation logs, and K-1 passive losses.
Claiming depreciation you never took, in a single year. How it works.
Exchange planning, depreciation recapture and exit timing.
Deferral and long-term exclusion for qualifying reinvested gains. Opportunity Zones vs. energy communities.
Usually not. Rental losses are generally passive, so they can only offset passive income. The main exceptions:
Requires more than half of your working time and more than 750 hours a year in real property trades or businesses, plus material participation in your rentals.
If the average guest stay is seven days or less and you materially participate, the rental isn't treated as a passive rental activity. The truth about the "loophole" · short-term vs. long-term.
Owners who actively participate can deduct up to $25,000 of rental losses. That allowance phases out between $100,000 and $150,000 of modified adjusted gross income.
Qualifying depends on your facts and your records, and we help you set up the logs and documentation that support your position.
A cost segregation study splits a building into components with shorter lives, so more of the cost can be depreciated sooner. 100% bonus depreciation is back for qualifying property acquired after January 19, 2025, which can make those early deductions large.
Whether a study is worth its fee depends on the property's value, your tax bracket, whether you can use the losses (see above) and how long you plan to hold. Some states, including California, don't follow federal bonus depreciation.
Read more: is cost segregation worth it on a small rental? · short-term rental cost segregation.
A 1031 exchange lets you defer gain by reinvesting in like-kind real property, under strict timing and identification rules. The 2025 tax law didn't change these rules. Why landlords use 1031s · how to avoid a bad trade.
A high-income business owner exchanged a 40-unit apartment building for four syndicated multifamily properties in several states. The exchange deferred roughly $1.1 million of gain and avoided about $358,000 of tax that year, and the owner no longer has day-to-day landlord duties.
Read the 1031 exchange case studyFirm figures as reported by My CPA Pro.
★★★★★"The tax planning is amazing. I'm literally saving thousands."
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If you own more than one or two rentals, or want to use cost segregation, real estate professional status or the short-term rental rules, it helps to work with someone who plans for them regularly. Most of the work is in qualifying for these benefits and documenting them.
They can, if the average guest stay is seven days or less and you materially participate. In that case the losses aren't treated as passive. You need to meet both conditions and document them. Details.
The IRS has several tests. The most common are 500+ hours in the activity during the year, or 100+ hours and at least as much as anyone else, including cleaners and property managers. We help you track hours as you go.
You must spend more than half of your working hours, and more than 750 hours a year, in real property trades or businesses in which you materially participate, and you must materially participate in your rentals. A full-time W-2 job usually makes this hard to meet, but a spouse may qualify.
Yes, if it's qualifying property acquired after January 19, 2025. Acquisition and contract dates matter. The building itself isn't eligible, which is why investors use cost segregation to identify the parts that are.
Depreciation you took, or could have taken, is generally recaptured when you sell, and the real estate portion is taxed at up to 25%. Planning the sale or using a 1031 exchange can change the result. Recapture explained.
No. 1031 exchanges of real property work the same way they did before the 2025 tax law.
It depends on how many properties and entities you have and how much planning you need. We'll give you a clear quote after the free strategy call.
Let's plan the tax side before you sign.
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This page is general information, not tax, legal or financial advice for your situation. Tax rules change and depend on your facts, so talk with a qualified professional before acting.
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