Real Estate Tax Benefits

I’ve tested these 14 tax strategies for over a decade. They are the most reliable for keeping more money in your pocket: For Real Estate Investors: Cost Segregation Studies: These remain valuable for accelerating depreciation on high-value assets, even with declining bonus depreciation rates 1031 Exchanges: Still available for deferring capital gains when selling properties. Real Estate Professional Status (REPS): This status continues to allow investors to deduct rental losses against active income Self-directed IRAs: These remain a viable option for investing in real estate while deferring taxation. For Business Owners: S Corp Tax Election: This strategy for reducing self-employment taxes is still applicable. QBI Deduction: The 20% Qualified Business Income deduction remains available for pass-through entities Home Office Deduction: Still available for those who use part of their home exclusively for business Hiring Family Members: This strategy for income shifting continues to be valid. Retirement Plan Contributions: Maximizing contributions to Solo 401(k)s and SEP IRAs remains an effective tax-reduction strategy For High-Income Earners: Municipal Bonds: These continue to provide tax-free interest income. HSAs & FSAs: These tax-advantaged accounts for medical expenses are still available. Charitable Giving Strategies: Donating appreciated assets remains a tax-efficient giving method. Tax-Loss Harvesting: This strategy for offsetting capital gains is still applicable. Deferred Compensation Plans: These plans continue to be useful for managing tax brackets. Don’t wait until your tax bill arrives—fix it before it’s too late.

Family Offices know that preserving capital is more than protecting against a market downturn. It means structuring assets to reduce tax exposure across generations. One of the most effective tools for that is the step-up in basis. Suppose an investment in real estate began at $5 million and grew to $100 million. If that asset were sold during the owner’s lifetime, taxes would apply to the $95 million gain. But if the asset is held until death, the cost basis resets to its current market value. Heirs now start from a basis of $100 million. Any past gains are wiped away for tax purposes. Future taxes only apply to appreciation beyond that new basis. This simple reset can mean tens of millions in taxes legally avoided. Many Family Offices hold core assets for decades. That long-term hold, combined with appreciation, creates significant embedded gains. Without the step-up, those gains are exposed at liquidation. For example, if the capital gains rate is 25%, then a $95 million gain could trigger $23.75 million in taxes. A step-up eliminates that liability. The difference stays with the family, available to reinvest or redeploy into the next opportunity. Real estate aligns with this strategy. It appreciates over time, provides current income, and allows for depreciation during the hold. And because Family Offices often build long-term direct real estate portfolios, the step-up in basis reinforces their approach. According to the Family Office Real Estate Institute, 76.4% of Family Offices invest in real estate to create generational wealth. Tax strategies like the step-up are one reason why real estate continues to play such a key role in Family Office portfolios. Capital preservation isn't just about risk management. It requires structure, timing, and a clear view of tax exposure. Using the step-up in basis correctly can help secure wealth across generations. Families who plan with these tools keep more of what they’ve built. That’s smart estate strategy and good stewardship.

One of the most exciting changes in the new tax bill is the 𝐩𝐞𝐫𝐦𝐚𝐧𝐞𝐧𝐭 𝐫𝐞𝐭𝐮𝐫𝐧 𝐨𝐟 𝟏𝟎𝟎% 𝐛𝐨𝐧𝐮𝐬 𝐝𝐞𝐩𝐫𝐞𝐜𝐢𝐚𝐭𝐢𝐨𝐧. It is something every tax planner for 𝐫𝐞𝐚𝐥 𝐞𝐬𝐭𝐚𝐭𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐨𝐫𝐬 has been hoping for, and it is finally here. This is awesome news for clients who use the 𝐬𝐡𝐨𝐫𝐭-𝐭𝐞𝐫𝐦 𝐫𝐞𝐧𝐭𝐚𝐥 (𝐒𝐓𝐑) 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐲. Let us understand by an example. Say a client earns $𝟐𝟓𝟎,𝟎𝟎𝟎 𝐢𝐧 𝐖-𝟐 income. Normally, they would pay approx $𝟓𝟐,𝟐𝟔𝟐 in 𝐟𝐞𝐝𝐞𝐫𝐚𝐥 𝐭𝐚𝐱𝐞𝐬. Now, for tax planning, the client 𝐛𝐮𝐲𝐬 𝐚 𝐩𝐫𝐨𝐩𝐞𝐫𝐭𝐲 worth $𝟐𝟕𝟎,𝟎𝟎𝟎 that qualifies as an 𝐒𝐓𝐑 and gets a 𝐜𝐨𝐬𝐭 𝐬𝐞𝐠𝐫𝐞𝐠𝐚𝐭𝐢𝐨𝐧 𝐬𝐭𝐮𝐝𝐲 done. The study shows $𝟏𝟓𝟎,𝟎𝟎𝟎 can be 𝐝𝐞𝐩𝐫𝐞𝐜𝐢𝐚𝐭𝐞𝐝 in the first year. Because the client is materially involved, the IRS allows this $𝟏𝟓𝟎,𝟎𝟎𝟎 (assuming no other income and expense) 𝐥𝐨𝐬𝐬 to be treated as 𝐧𝐨𝐧-𝐩𝐚𝐬𝐬𝐢𝐯𝐞 on 𝐒𝐜𝐡𝐞𝐝𝐮𝐥𝐞 𝐄. That means it can directly 𝐨𝐟𝐟𝐬𝐞𝐭 their W-2 income, dropping their 𝐭𝐚𝐱𝐚𝐛𝐥𝐞 𝐢𝐧𝐜𝐨𝐦𝐞 to $𝟏𝟎𝟎,𝟎𝟎𝟎, which is not possible in the case of rental passive income. This brings their tax down to about $13,614, 𝐬𝐚𝐯𝐢𝐧𝐠 them over $𝟑𝟖,𝟔𝟒𝟖 in one year. Until now, bonus depreciation was being 𝐩𝐡𝐚𝐬𝐞𝐝 𝐨𝐮𝐭 𝐛𝐲 𝟐𝟎% 𝐞𝐚𝐜𝐡 𝐲𝐞𝐚𝐫. In 2022, it was 100%, then it dropped to 80% in 2023, 60% in 2024, and was scheduled to decrease to 𝐳𝐞𝐫𝐨 by 𝟐𝟎𝟐𝟕. But with this 𝐧𝐞𝐰 𝐛𝐢𝐥𝐥, 𝟏𝟎𝟎% 𝐢𝐬 𝐛𝐚𝐜𝐤 for good. There is one odd detail. This full 100% bonus depreciation only applies to property bought on or after 𝐉𝐚𝐧𝐮𝐚𝐫𝐲 𝟐𝟎, 𝟐𝟎𝟐𝟓. If someone closed on a 𝐩𝐫𝐨𝐩𝐞𝐫𝐭𝐲 𝐛𝐞𝐭𝐰𝐞𝐞𝐧 𝐉𝐚𝐧𝐮𝐚𝐫𝐲 𝟏 𝐚𝐧𝐝 𝐉𝐚𝐧𝐮𝐚𝐫𝐲 𝟏𝟗, 𝟐𝟎𝟐𝟓, 𝐭𝐡𝐞𝐲’𝐝 𝐨𝐧𝐥𝐲 𝐠𝐞𝐭 𝟒𝟎% 𝐝𝐞𝐩𝐫𝐞𝐜𝐢𝐚𝐭𝐢𝐨𝐧. Strange, but that is how the rule is currently written. 𝐍𝐨𝐭𝐞: I have explained the basics of the STR strategy for a general understanding, but several important factors need to be handled carefully to make it work properly. #cpa #cpafirm #cpafirms #realestate #taxplannong #taxsaving #uscpa #learning #obbb

We're building a $20M apartment building with $8M of investor equity. In Year 1, our investors are projected to receive over $5M in bonus depreciation, a paper loss equivalent to ~65% of their initial investment. Here's a quick playbook on how that works, and the "super-move" that can make those tax savings permanent. How Bonus Depreciation Works: Normally, you write off a building over 27.5 years. But through a Cost Segregation Study, we can identify parts of the asset with shorter lifespans (like appliances, flooring, and site work) and accelerate decades of deductions into Year 1. Who can use this loss? ➡️ Passive Investors: Can use the deduction to offset other passive income (e.g., from other rentals or partnership K-1s). ➡️ Real Estate Professionals (REPs): Can use the deduction to offset all income, including W-2 or active business income. (Any unused losses can be carried forward to future years.) The Catch: Depreciation Recapture That giant $5M deduction isn't a free lunch forever. When a property is sold, the IRS can "recapture" the depreciation you claimed and tax it at rates up to 25%. But there are two powerful ways to plan for this. The Solutions: Deferral vs. Elimination Path #1: The 1031 Exchange (The Deferral) You can sell the property and roll the proceeds into a new one. This defers both capital gains and the depreciation recapture tax. You're essentially kicking the can down the road. Path #2: The Opportunity Zone (The Elimination) This is the super-move. If the project is structured within an OZ fund from day one and held for 10+ years, our investors get: ✅ No capital gains tax on the sale. ✅ No depreciation recapture. The upfront $5M deduction becomes a permanent, tax-free benefit. This isn't theory—this is the exact structure we're using for our current $20M project. For the investors and CPAs here: When you're evaluating a deal, how much weight do you put on the after-tax benefits like bonus depreciation and its exit strategy?

One Big Beautiful Bill – What CRE Investors Need to Know Congress just passed the One Big Beautiful Bill (“OBBB”) — and love it or hate it, the implications for commercial real estate are real. As someone advising multifamily investors and developers every day, here’s my take on what matters most for our sector: - 100% Bonus Depreciation Restored Immediate write-offs on property improvements = stronger after-tax returns, better cash flow, and a compelling reason to upgrade or reposition assets. - Permanent 20% QBI Deduction Pass-through owners (LLCs, LPs, S-corps) get to keep more of what they earn—critical for syndicators, family offices, and developers. - Estate Tax Exemption Raised to $15M+ Smooth generational transfers are now easier to structure, especially for operators with long-hold strategies or growing portfolios. - Higher SALT Cap (but income-limited) Investors in high-tax states like Massachusetts get partial relief—but the benefits phase out above $400K MAGI. - Clean Energy Tax Credit Rollbacks Some solar and green-building incentives were pulled back—making it important to reassess the ROI on sustainability strategies. - Deficit Spending = Interest Rate Risk While tax relief is welcome, deficit pressure may fuel upward movement in cap rates. Staying ahead on financing strategy is essential. Takeaways to CRE investors right now: • Time improvements to maximize bonus depreciation • Consider pass-through structures to unlock QBI benefits • Proactively plan estate transfers while the window is open • Recalculate IRRs for green building projects post-credit rollback • Lock in long-term debt before rates catch up to fiscal policy If you’re actively acquiring, recapitalizing, or preparing for generational ownership transition—this bill changes the math. What are your thoughts? #cre #capitalmarkets

"We know that the house in Lake Tahoe is your happy place, so your mother & I would love to gift this property to you & your family". Waterfront property in the majestic Lake Tahoe... what a generous gift! 🏡 But what if our children decide to settle down on the East Coast & we want to be closer to them? This was a question one of my clients was grappling with after his parents expressed their desire to give him the family vacation property in Lake Tahoe. My client's parents knew that the Tahoe home was their son's "happy place" and they wanted him & his family to be able to experience many wonderful memories at this place. His parents were also seeking to proactively get their estate plan in order. My client was thrilled by the opportunity to receive the gift of Tahoe Home that he has fond memories of while he was growing up. He asked me, "Chris - is there anything that we're not thinking about before accepting this gift?" I'm sure glad he shared this with me & raised this question! Turns out, his parents originally acquired this property in the early 2000's for $240k. Based on recent home sales nearby, the current value of the home is likely north of $4M. Given the significant appreciation, I cautioned that if he accepted this property as a gift, he would take over the donor's adjusted basis of the property. Adjusted basis = purchase price + any home improvements. Since the adjusted basis is so low relative to what this home is currently worth, this could result in significant tax consequences if my client chose to sell this property in the future. Whereas, if my client received this home as part of his inheritance (upon death of the original owner), then he would acquire the property with a "stepped-up" cost basis. The step-up in basis would result in my client acquiring the Tahoe home for the Fair Market Value on the date of death (i.e. ~$4M), therefore eliminating $3.5M of embedded capital gains & $800k+ of taxes upon the eventual sale of this property. I also raised the opportunity that if his parents are seeking to do estate planning for their personal situation, there are some advantageous methods of gifting property from a tax perspective, such as a Qualified Personal Residence Trust. This type of trust shifts the residence to "outside the estate" of his parents & can help reduce the amount of gift tax that would be incurred when transferring assets to a beneficiary. Given what is at stake, we agreed to have a three-way meeting with my clients & his parents to discuss the objective for the Tahoe Home and the most effective way to accomplish this goal. Inheriting a $4M property in beautiful Lake Tahoe is certainly a fortunate "problem" to encounter. However, the purpose of sharing this post is to highlight the importance of communication between individuals & their advisor, as well as the potential benefits of thoughtful planning around multi-generational gifting.

One of the most misunderstood wealth strategies in CRE shows up at death. When a property owner passes away, heirs typically receive a step-up in basis. That means the tax basis resets to fair market value on the date of death. Not what the property was bought for 30 or 40 years ago. The value today. Why does that matter? Because decades of appreciation can disappear for capital gains tax purposes. If heirs sell shortly after inheriting, the tax bill is often minimal or even zero. Now compare that to selling while alive. A sale usually triggers capital gains tax, depreciation recapture. And a significant check to the Internal Revenue Service. That difference is why many long term owners never rush to sell. They refinance and focus on cash flow. They let time and inflation do the heavy lifting. Then they pass the asset on. This is not emotional decision making. It is strategic. Understanding this distinction can change how owners think about holding, selling, and legacy planning.

A client once told me, “My CPA said I’m already taking depreciation, so I’m good.” He wasn’t good. Not even close. He owned a 48-unit multifamily in Tennessee. Great property, strong cash flow, and on paper, a massive tax bill. When I asked if his CPA ever broke down the property by asset type, there was silence on the line. That silence is how most investors lose hundreds of thousands of dollars without even knowing it. We did a cost segregation study and found more than $900,000 that could be accelerated depreciation. That translated to hundreds of thousands in immediate tax savings. He was blown away. “I wish someone had told me about this five years ago.” Here’s the truth: Most investors don’t have a tax problem. They have a knowledge problem. Cost segregation isn’t just a tax strategy. It’s the difference between hoping for better returns and creating them. If you own real estate and haven’t looked into it yet, start asking better questions. The answers could change your bottom line. Questions? #weissadvice

One of the biggest secrets in real estate is that you can make money and still show a loss on paper. That’s the part most new investors never understand. Your property can be cash flowing every month and your taxable income can still go down at the same time. The reason is depreciation. The IRS lets you write off the “wear and tear” of your property every single year. Even if the rent is rising Even if the property is appreciating Even if your bank balance looks better month after month You still get to deduct a portion of its value as if it’s slowly losing worth. This creates a powerful gap. Money coming in. Taxable income going down. That’s why investors love real estate. It lets you keep more of what you earn without doing anything extra. Depreciation softens your tax bill. It cushions your cash flow. It protects your income even when your property is actually growing in value. And if you add cost segregation studies or short term rental rules on top of it The write offs can jump from a small deduction to tens of thousands of dollars in paper losses in a single year. This is how so many investors legally pay very little in taxes. It’s not magic. It’s not a loophole for the wealthy. It’s simply understanding how the rules work and using them the way they’re written. Real estate pays you every month And the tax code rewards you for owning it. 💰 Follow Barbara Schreihans, MST for bold tax strategies, wealth insights, and real stories that show you how to keep more of what you earn.