CPA Services for Real Estate Investors and Landlords

Who This Is For

Individual rental property owners, multi-unit landlords, fix-and-flip investors, short-term rental operators (Airbnb, VRBO), real estate professionals seeking unrestricted loss deductions, and partners in real estate LLCs and partnerships.

Top Tax Issues for Real Estate Investors

• Passive activity losses limited by IRC Section 469

  Rental losses are passive by default and capped at $25,000 per year (phased out at $100K-$150K AGI). Real Estate Professional Status under Section 469(c)(7) lifts this cap entirely, but it requires meeting strict 750-hour and material participation tests.

• Depreciation tracking and recapture

  Residential rentals depreciate over 27.5 years; commercial over 39 years. Cost segregation studies can accelerate deductions, but Section 1250 depreciation recapture (taxed up to 25%) and Section 1245 recapture (taxed at ordinary rates) hit on sale.

• 1031 exchange compliance

  Section 1031 like-kind exchanges defer capital gains but require strict 45-day identification and 180-day acquisition deadlines, qualified intermediary involvement, and identical taxpayer titling. Boot received is currently taxable.

• Short-term rental classification

  Average rental periods of 7 days or less can convert a rental into an active trade or business (often Schedule C), changing self-employment tax exposure and material participation rules.

Strategies TS CPA Uses

• Cost segregation studies

  Reclassify portions of a building (5-year, 7-year, 15-year property) to accelerate depreciation. Combined with bonus depreciation under Section 168(k) (100% restored under OBBBA for assets placed in service after January 19, 2025), this can produce six-figure first-year deductions.

• Real Estate Professional Status (REPS) qualification

  Married couples can have one spouse qualify as a Real Estate Professional, allowing unlimited rental loss deduction against W-2 income. Documentation of 750+ hours, more time in real estate than any other activity, and material participation per property is essential.

• Section 121 exclusion planning

  Up to $250K (single) / $500K (joint) of capital gain from sale of a primary residence is excluded if the 2-of-5-year ownership and use test is met. Strategic timing around residence conversions and rental periods preserves eligibility.

• Entity structuring for asset protection and tax efficiency

  Holding rentals in LLCs (or LLC series) provides liability separation. Pass-through entity tax (PTET) elections, when available at the state level, can convert non-deductible state taxes into federally-deductible business expenses.