Real estate is one of the most tax-advantaged investments in America, but only if you use the rules deliberately. These seven strategies are where most investors find their biggest savings.
A cost segregation study reclassifies parts of a building into 5-, 7- and 15-year property. With 100% bonus depreciation now permanent for property acquired after January 19, 2025, those amounts can potentially be deducted in the first year, often creating a six-figure deduction on a multi-million-dollar property. Properties bought in earlier years can catch up missed depreciation through a look-back study.
Selling one investment property and buying another "like-kind" property through a qualified intermediary lets you defer capital gains and depreciation recapture. Strict deadlines apply: 45 days to identify a replacement and 180 days to close. Combined with cost segregation on the replacement property, it's a powerful cycle.
Real estate professional status can make rental losses non-passive, so they can offset other income. You generally need to spend more than half your working time, and more than 750 hours a year, in real property trades or businesses, and materially participate in your rentals. It often suits one spouse in a household where the other has W-2 income.
Where the average guest stay is seven days or less and you materially participate, losses from a short-term rental may be non-passive, even without real estate professional status. Paired with cost segregation, this is one of the most popular strategies for high earners. Read our guide to cost segregation for short-term rentals.
When you renovate, the old roof, HVAC or flooring you remove may still be on your depreciation schedule. A partial disposition election lets you write off its remaining value instead of depreciating assets that no longer exist. A cost segregation study makes this far easier by putting a value on each component.
The 20% qualified business income deduction under Section 199A was made permanent by the 2025 tax law. Rental activities that rise to the level of a trade or business, including those meeting the IRS safe harbor for rental enterprises (generally 250+ hours of services a year and separate books), may qualify for the deduction.
How you own property (individually, in an LLC, a partnership, or with an S corporation managing it) affects liability, self-employment tax, estate planning and how easily you can bring in partners. Getting it right at acquisition is much easier than restructuring later.
Accelerated depreciation isn't a free lunch. When you sell, depreciation on real property can be taxed at up to 25%, and on personal property as ordinary income. Planning your exit, through a 1031 exchange, a long hold, or stepped-up basis for heirs, is part of every good real estate tax strategy.
The right mix depends on your portfolio, income and plans. Learn more about our TAXATION Services service or book a free consultation.
This article is general information, not tax, legal or accounting advice. Tax rules change and outcomes depend on your specific facts; speak with a qualified tax professional before acting.
Both let you write off equipment and improvements in year one, but they work differently. A clear comparison of Section 179 and 100% bonus depreciation for 2026.
Read article →When a cost segregation study pays off, when it doesn't, and how 100% bonus depreciation changes the math for US property owners in 2026.
Read article →How short-term rental owners combine cost segregation, 100% bonus depreciation and material participation to offset other income, plus the rules to watch.
Read article →Book a free consultation and we'll identify which of these strategies fit your portfolio.
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