Tax Services for Real Estate Investors

Whether you own residential rentals or commercial property, or invest through syndications, real estate creates tax complexity that has to be managed ahead of time. We help investors maximize depreciation, navigate cost segregation studies, structure 1031 exchanges, aggregate K-1s from multiple partnerships, and plan around the passive activity rules before year-end.

Depreciation and Cost Segregation

Depreciation is the biggest tax advantage of owning real estate, and most investors leave some of it unclaimed. A cost segregation study breaks a building into components (flooring, fixtures, site improvements) that can be depreciated much faster than the building itself. We help you decide when a study is worth its cost, then apply the results, including bonus depreciation where it fits.

A study is worth more right now than it has been in years. The 2025 tax law restored 100% bonus depreciation for property acquired after January 19, 2025, so everything a study reclassifies into 5-, 7-, and 15-year property can generally be written off in full the year it's placed in service, instead of over decades. For a recent purchase or a major renovation, that can mean a first-year deduction that rivals the down payment. Read how cost segregation works and when it pays off.

Depreciation Recapture When You Sell

Accelerated depreciation is a deferral, not a permanent exclusion, and the bill comes due when you sell. The depreciation you claimed on reclassified components (the 5-, 7-, and 15-year property from a cost segregation study) is recaptured at ordinary income rates, and the depreciation on the building itself is taxed as unrecaptured Section 1250 gain at up to 25%. If you plan to sell in a few years, that shrinks the benefit of a study. If you plan to hold long-term, exchange under Section 1031, or pass the property to heirs with a stepped-up basis, the math usually works strongly in your favor. We model recapture against your exit plan before you commit to accelerating anything.

Passive Loss Rules and Real Estate Professional Status

Rental losses are generally passive, so they can only offset passive income, unless you qualify for an exception. We review whether you qualify, and plan around the rules when you don't:

• Real estate professional status. This requires meeting hour thresholds and materially participating in your properties.
• Short-term rentals. Average stays of seven days or less change the rules, as explained below.
• The $25,000 allowance. A special allowance for active rental owners, which phases out as income rises.

The difference can decide whether depreciation saves you tax this year or sits as a carryforward.

Short-Term Rentals (Airbnb and VRBO)

Short-term rentals follow different tax rules than long-term rentals, and the difference can be worth a lot. We help Airbnb and VRBO owners in Midland and across the Permian Basin get the treatment right and plan around it:

• The short-term rental exception. When the average guest stay is seven days or less, the property generally isn't treated as a rental activity under the passive loss rules. If you also materially participate, losses (including accelerated depreciation from a cost segregation study) can offset W-2 or business income. The hour tests and records matter, so we help you track them.
• Schedule E or Schedule C. Hotel-style services, such as daily cleaning or meals, can turn rental income into business income subject to self-employment tax. We look at what you provide and report it the right way.
• Personal use. Days you or your family use the property can limit deductions. We plan your personal use and expense allocation before the year ends.
• Occupancy taxes and 1099-Ks. Texas and many cities charge hotel occupancy tax on short stays, and the platforms don't always collect every local tax. We help you confirm what's covered and reconcile platform 1099-Ks to your books.

1031 Exchanges, K-1s, and Multi-State Rentals

• 1031 exchanges. We work with you and your intermediary on timing and reporting, so gain stays deferred.
• K-1 aggregation. We track basis and passive losses across syndications and partnerships, and plan around K-1s that arrive late.
• Out-of-state property. A rental outside Texas can mean a nonresident return in that state. We handle those filings and the credits that go with them.

Real Estate Tax FAQ

Is a cost segregation study worth it on a smaller property?

Sometimes. It depends on the property's cost, how long you'll hold it, and whether you can use the losses. We'll run the numbers before you pay for a study.

What happens to the depreciation when I sell?

It's recaptured. Depreciation on reclassified components is taxed at ordinary rates, and depreciation on the building is taxed at up to 25%. A 1031 exchange defers both, and a long hold spreads the benefit out, so we look at your exit plan before recommending a study.

Can my rental losses offset my W-2 or business income?

Only in certain cases: if you qualify as a real estate professional, if your short-term rental's average guest stay is seven days or less and you materially participate, or if you fall within the $25,000 allowance. We'll review which, if any, apply to you.

Do you work with syndication investors?

Yes. We track basis and passive losses across multiple K-1s, including K-1s that arrive late.