Tax strategy for real estate investors
You didn’t buy rental property to hand a third of it back. Cost segregation, Real Estate Professional Status, the short-term rental tests and 1031 exchanges are all in the code — but they only work if someone runs them in the right order, before the year closes.
If you own rental property and your CPA only talks to you at filing time, you are almost certainly overpaying. Real estate is the most tax-advantaged asset class in the code, but the advantages are elective — depreciation has to be accelerated deliberately, losses have to be made non-passive before they can offset income, and gains have to be planned for years before the sale. We do that work year-round for investors from one door to several hundred.
Not sure this is you? The Discovery Call is free and we will tell you honestly if it isn’t.
30 minutesThe problem isn’t your accountant. It’s the job you hired them for.
Most real estate investors are working with a competent return preparer. That’s the issue — preparation is a backward-looking job. By the time your return is being prepared, every decision that could have lowered the bill has already been made.
My CPA is great. He files everything on time, he’s never made a mistake, and he’s never once called me in October to tell me to do something.
The most common sentence we hear on a Discovery Call
You’re taking depreciation, but only the slow kind
Your building sits on a 27.5- or 39-year schedule because nobody ever ordered a study. A fifth to a third of your basis could be on a 5-, 7- or 15-year life instead.
You have losses you can’t use
The paper loss exists. It’s just suspended, because nothing was done to make it non-passive before the year closed.
Nobody has told you what a sale will cost
Depreciation recapture and capital gains get discovered at closing instead of planned for three years out.
Your entity structure was set up once and never revisited
An LLC that made sense at two doors is often the wrong container at ten, and the wrong one entirely once flips or an operating business enter the picture.
You learn strategies on podcasts and nobody implements them
You know the words — REPS, cost seg, 1031. What you don’t have is someone who owns making them happen on your return.
What changes when planning comes first
None of this is exotic. All of it is in the code, and all of it is available to you — the difference is a firm that runs it as a system instead of reacting to it in April.
Where you are now
- Depreciation spread across 27.5 or 39 years
- Losses suspended and carried forward
- Entity chosen once, at formation
- Strategy discussed after the year closes
- A tax bill you find out about in April
Where this takes you
- A fifth to a third of basis pulled into year one
- Losses made non-passive, offsetting real income
- Structure reviewed as the portfolio changes
- Decisions made in Q3 and Q4, while they still count
- A number you set on purpose, months in advance
Cost segregation
Reclassify components into 5-, 7- and 15-year lives, then pair with bonus depreciation. The same deduction, years sooner. How it works.
Look-back studies
Own it for years without a study? Form 3115 lets you claim the entire catch-up in one year — no amended returns. The look-back study.
REPS or the STR tests
The qualification work that turns a suspended paper loss into one that offsets active income. REPS · STR loophole.
Exit planning
1031 exchanges, installment structures and recapture modeling, started years before the sale rather than weeks. 1031 exchanges.
What this looks like in practice
Three composite scenarios built from the strategies above. The numbers are illustrative and rounded — what they show is the shape of the outcome, not a promise of yours.
Six doors, no study, ten years in
- Portfolio basis
- $2.1M
- Never had a cost seg
- 10 years
- Strategy
- Look-back study + Form 3115
Illustrative composite. Not a client record and not a promise of savings — your result depends entirely on your facts.
First short-term rental, W-2 spouse
- Purchase price
- $780K
- Avg. stay
- under 7 days
- Strategy
- Material participation + cost seg
Illustrative composite. Not a client record and not a promise of savings — your result depends entirely on your facts.
Scaling from four doors to twelve
- Annual tax bill
- $140K
- Structure
- Single LLC, all properties
- Strategy
- Restructure + REPS + staged studies
Illustrative composite. Not a client record and not a promise of savings — your result depends entirely on your facts.
Trusted by investors for decades, not seasons
I’ve used Investors Accounting for many years and would recommend them to all real estate professionals that are looking for an accountant with specialized knowledge in industry specific tax strategy.
Real estate professional · long-time client
Reasonable price. This company has been our accountants for several years now and has consistently provided not only good service for our somewhat complicated tax returns, but also good advice for tax planning as we get closer to retirement. Would highly recommend!
Client for several years
Finding an accountant who actually understands the nuances of real estate is a game changer. In 2007, my previous accountant was finding it difficult to answer questions regarding my rental properties. A CPA referred me to Roger Herring and his firm Investor’s Accounting has been preparing my taxes ever since. They aren’t just number crunchers, they save me thousands. Highly recommend for any investor!
Rental property investor · client since 2007
The path from here
Four steps. The first one is free and takes half an hour.
Discovery Call — free, 30 minutes
A relaxed conversation about your situation. No documents, no preparation, no pitch. You leave knowing whether there is meaningful money on the table and roughly how much.
Comprehensive Tax Consultation
A one-hour working session plus a full review of your last three years of returns. We map your income, entities and exposure, then build a written strategy with specific action items and an order of operations.
Implementation, before the year closes
Elections filed, studies commissioned, structures formed, documentation systems started. This is the step most firms skip and the only one that actually changes your bill.
Year-round planning
Quarterly reviews, projections before Q4 decisions, and a plan that updates when your income, your portfolio or the law changes.
The strategies behind this
Plain-English guides, free to read, no email required.
Before you book
We also work with
High-Income W-2 Professionals
Your income is excellent and almost none of it is shelterable. You max the 401(k), you write the check, and you watch a third of your work disappear before it reaches you.
See this path →Trades & Construction Owners
You built a real business with trucks, crews and revenue — and you’re taxed like a sole proprietor who got lucky. The structure never caught up to the growth.
See this path →Find out what’s actually on the table
Thirty minutes, no preparation, no obligation. We’ll either find meaningful money to preserve — or tell you honestly that you’re already well positioned.