Tax Benefits of Real Estate

All agents have to complete real estate continuing education, but the best don't stop there. Our industry is ever-changing, and the most successful agents are the ones who never stop learning.

That’s why we’ve put together this collection of deep-dive resources just for you. These resources go beyond what's covered in our Tax Benefits of Residential Rental Property CE course, giving you deeper insights, fresh perspectives, and actionable strategies to apply in your day-to-day business. So dive into these expert-approved reads and keep pushing your business forward.

1️⃣ IRS Rental Income and Expenses

This IRS resource spells out exactly how rental income is taxed and what expenses you can deduct as a landlord. It covers everything from what counts as rental income (cash rent, advance rent, lease-cancellation payments, etc.) to which expenses are deductible – think mortgage interest, property taxes, maintenance costs, depreciation, and repairs.

Real estate agents should read this to get authoritative guidance straight from the source, making sure they understand the rules before advising clients.

2️⃣ Upcoming Tax Law Changes for RE Investors

Tax laws are always evolving, and this article highlights major changes on the horizon that could impact real estate investors. For example, several key provisions of the Tax Cuts and Jobs Act (TCJA) are set to sunset after 2025, potentially ushering in higher tax rates and new rules for property owners.

The piece gives a forward-looking view of possible shifts – from adjustments in income tax brackets to the phaseout of 100% bonus depreciation – so investors can plan ahead rather than be caught off guard. Real estate agents who stay informed through resources like this can better guide their clients through long-term investment decisions and year-end tax planning.

3️⃣ Short-Term Rental “Loophole” Tax Strategy

Ever wondered how a vacation rental could slash someone’s tax bill? This case study tells the story of an investor who, despite not qualifying as a full-time real estate professional, used a special short-term rental tax “loophole” to turn their rental property losses into about $78,000 of tax savings.

The key was meeting the IRS’s material participation rules (basically, putting in enough active hours managing an Airbnb) and using smart moves like a cost segregation study to accelerate depreciation on the property.

Real estate agents can learn how creative approaches with short-term rentals can help clients offset other income and significantly cut their tax bills – a win-win for investors looking for savvy tax strategies.

4️⃣ $2.6  Million Saved via Cost Segregation

Another real-life example comes from a large apartment investor who saved big on taxes by turbocharging depreciation. In this case, a 312-unit rental property owner worked with CPAs and engineers on a cost segregation study, reclassifying parts of the buildings to shorter depreciation lives.

The result? Nearly $4.5 million in immediate cash-flow benefits and about $2.6 million in tax savings (in present value) for the owner. This success story, shared by an accounting firm, shows how powerful advanced tax tools can be.

Real estate agents should be aware of strategies like cost segregation when advising high-end investors – it’s a reminder that sometimes digging deeper into the tax code can uncover huge savings.

5️⃣ Ultimate Guide to Rental Property Tax Deductions

For a practical playbook on landlord tax write-offs, check out Stessa’s comprehensive guide (co-written with a CPA firm). It covers the “best practices” every rental owner should know, from going digital with recordkeeping to prepping early for tax season.

The guide breaks down all the common deductions – mortgage interest, insurance, utilities, repairs, and more – and explains how to capitalize expenses vs. deduct repairs and how rental depreciation works over 27.5 years. It even delves into big-picture strategies like handling passive losses and using 1031 exchanges to defer gains.

Real estate agents will find this resource useful to make sure no deduction is overlooked, helping their clients maximize deductions and keep more profit in their pockets (after all, who doesn’t like a little “found money” at tax time?).

6️⃣ 7 Tax Benefits of Real Estate Investing

To see how investment strategy and taxes go hand in hand, this reader-friendly post outlines seven major tax benefits available to real estate investors. It ranges from everyday write-offs (taking all those common deductions like mortgage interest, property taxes, and operating expenses) to more strategic moves: for example, holding properties over a year to get favorable long-term capital gains rates instead of higher ordinary rates.

It also highlights using 1031 exchanges to defer taxes when swapping properties, investing through self-directed retirement accounts, taking depreciation deductions, and even tapping into Opportunity Zone incentives.

Real estate agents should dig into this because it shows how savvy investors structure deals to capitalize on tax laws – insights you can share with clients to help them build wealth more efficiently.

7️⃣ Avoiding Common Landlord Tax Pitfalls

Nobody wants an IRS audit or an unhappy surprise at tax time. This article, featuring advice from a real estate CPA, flags common landlord tax mistakes and how to avoid them. For example, it warns against reporting rental income on the wrong form (filing on Schedule C as if it’s a business instead of the proper Schedule E for rental income – a mistake that can lead to paying self-employment tax by accident).

It also covers pitfalls like missing out on deductible expenses due to sloppy recordkeeping, misusing the real estate professional status rules, failing to carry forward passive losses, or using the wrong legal entity for a rental property (for instance, putting a rental in an S-Corp and later removing it can trigger an unnecessary taxable event).

By learning about these gotchas, real estate agents can help their landlord clients sidestep costly errors and stay on the IRS’s good side.

8️⃣ Taxes on Out-of-State Rental Properties

Investing in rentals across state lines adds another layer of tax complexity. This guide walks through what happens when you own property in one state but live in another. In short, you’ll typically need to file a non-resident tax return in each state where you have rental income (and also file in your home state). Fortunately, it explains that most home states offer a tax credit to prevent double taxation – for example, if you live in California and have a rental in Ohio, California will credit you for the tax you paid to Ohio on that rental income.

Real estate agents with clients buying properties out-of-state will find this information vital, as it helps set proper expectations about multi-state filing requirements and encourages investors to seek the right advice to navigate those rules.