Our tax team consists of experienced real estate CPA with deep expertise in real estate professional status, short-term rentals, passive activity losses, cost segregation, bonus depreciation, qualified improvement property, qualified opportunity zones, partial asset dispositions, partnerships, S-Corporations, and C-Corporations.
If you or your spouse qualify as a real estate professional, you can deduct rental losses against your active income, significantly reducing your tax bill. To qualify, you must spend:
- More than 750 hours annually in real estate activities.
- More than 50% of your working hours in real estate.
Short-term rental properties (Airbnb, VRBO, etc.) can qualify as a non-passive activity if:
- You materially participate (manage bookings, maintenance, etc.).
- Guests stay an average of seven days or less.
This allows rental losses to offset W-2 or business income without REPS qualification.
A cost segregation study accelerates depreciation by breaking down property components (e.g., flooring, lighting, appliances) into 5-, 7-, or 15-year depreciation schedules instead of 27.5 or 39 years. This can result in huge upfront tax deductions and increased cash flow.
Bonus depreciation allows you to write off 60% of qualifying assets in the first year (for 2024, decreasing annually).
Eligible assets include:
- Personal property (furniture, appliances).
- Land improvements (sidewalks, fences).
- Qualified improvement property (QIP).
- If you don’t qualify for REPS, passive losses can still offset passive gains (e.g., rental income, gains from other passive investments).
- Consider grouping elections to consolidate properties for tax purposes.
A 1031 exchange allows you to defer capital gains taxes when selling a property and reinvesting in a like-kind property.
Key rules:
- Identify a replacement property within 45 days.
- Close on the new property within 180 days.
Choosing the right entity structure (LLC, S-Corp, C-Corp, or Partnership) can impact how much tax you owe.
- LLCs offer liability protection and pass-through taxation.
- S-Corps can reduce self-employment taxes.
- C-Corps may benefit high-income investors reinvesting profits.
If you actively manage rental properties from home, you may be able to deduct a portion of:
- Rent/mortgage interest
- Utilities
- Property taxes
- Internet & phone bills
By investing capital gains in a Qualified Opportunity Fund, you can defer and potentially eliminate capital gains taxes on real estate investments held for at least 10 years.
If you replace a major component of a rental property (roof, HVAC system, etc.), you may be able to write off the remaining value of the old asset instead of depreciating it over time.
Selling underperforming real estate or assets at a loss can offset gains from other investments, reducing your overall tax liability.
Real estate investors can still deduct mortgage interest and property taxes on rental properties, lowering taxable rental income.
If you own a real estate business, you can hire your children (under 18) and pay them up to $14,600 tax-free (2024 standard deduction). This shifts income to a lower tax bracket while reducing your taxable income.
Investing in real estate through a Self-Directed IRA (SDIRA) allows tax-deferred or tax-free growth, depending on whether it's a Traditional or Roth IRA.
Reckenen provides tax, accounting, personal tax, and consulting services to individuals, middle-market, closely held companies, and
non-profit institutions. We offer a sophisticated array of services and capabilities to our clients, combined with the personal attention of
experienced professionals.
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