Accounting for real estate investors and agents

Real estate generates tax questions that compound over years: how a property was depreciated affects what happens when it sells, and decisions made at purchase are difficult to revisit a decade later. Agents have a separate set of issues, most of them arising from being self-employed with substantial vehicle and marketing expense.

Depreciation and cost segregation

Residential and commercial property depreciate over different lives, and the allocation between land and building at purchase sets the basis for everything after. For larger properties, separating shorter-lived components accelerates deductions meaningfully.

Passive activity loss rules

Rental losses are generally passive and limited, with exceptions for active participation and for real estate professionals. Which side of that line you fall on changes the return substantially and is worth establishing deliberately.

1031 exchanges

A like-kind exchange defers gain but has strict deadlines and a required intermediary. The planning has to happen before the sale closes, not after, and missing a deadline is not recoverable.

Sale and recapture

Depreciation taken over the years is recaptured on sale, which surprises owners who expected only capital gain treatment. Knowing the number before listing informs whether and when to sell.

Agents and brokers

Self-employed agents have vehicle expense, home office, marketing costs and often an entity question once commissions reach a certain level. Quarterly estimates matter, because commission income arrives unevenly.