Real estate offers some of the most powerful tax advantages in the tax code. From depreciation to 1031 exchanges, here's how to use them.

Real Estate Investment Tax Strategies

Depreciation

Residential rental property is depreciated over 27.5 years; commercial over 39 years. This non-cash deduction reduces taxable rental income without affecting cash flow.

Cost Segregation Study

A cost segregation study re-classifies building components into shorter depreciation categories (5, 7, or 15 years), dramatically accelerating deductions in the early years.

1031 Like-Kind Exchange

Defer capital gains when selling investment property by reinvesting in like-kind property
Must identify replacement property within 45 days
Must close on replacement property within 180 days
Use a qualified intermediary to hold proceeds

Opportunity Zone Investments

Invest capital gains into a Qualified Opportunity Fund
Defer original capital gains until 2026 (or sale of the QOF)
After 10 years, gains on the QOF investment are tax-free

The BRRRR Strategy and Taxes

Buy, Rehab, Rent, Refinance, Repeat—The cash-out refinance is not a taxable event, allowing you to pull out equity tax-free.

Passive Activity Rules

Rental losses generally passive
Deductible against passive income only (unless you're a real estate professional)
$25,000 allowance for active participants with AGI under $100,000

Real estate investor? Proper tax planning can significantly boost your after-tax returns.

Real Estate Investment Tax Strategies