Real Estate Tax Advisor Blog

Split image showing a plumber repairing a sink on one side and a construction worker replacing a roof on the other, illustrating the difference between repairs and improvements for real estate investors.
Not all property expenses are treated the same for tax purposes. The IRS draws a clear distinction between repairs, which are typically deductible immediately, and improvements, which must be capitalized and depreciated over time. For real estate investors, that difference has a real financial impact. It affects short-term cash flow, […]

How to Classify Repairs vs. Improvements

Two real estate professionals reviewing property and time-tracking documents to determine material participation hours for tax reporting
Not all hours are created equal, especially when it comes to taxes. The IRS distinguishes between hours that qualify as material participation and those that do not, but the reality is that this area isn’t black and white; it’s often gray and open to interpretation. Understanding how your time is […]

Which Hours Count for Material Participation? A Guide for Real ...

Modern row of multifamily rental properties, representing real estate assets that can benefit from cost segregation tax strategies.
As a real estate investor, you already know that depreciation is one of the most powerful tools in the tax code. But did you know there’s a way to accelerate those deductions and unlock more savings right now, instead of spreading them out over decades? That is where cost segregation […]

Cost Segregation Explained: A Real Estate Investor’s Guide to Tax ...

Two people discussing real estate investment strategy with a model house and contract on the table.
If you invest in real estate, you likely understand the impact that tax-efficient investing can have on your bottom line. There’s a qualification called Real Estate Professional Status, or REPS, that might help you significantly reduce your tax bill through smart tax planning while simultaneously building wealth. In this article, […]

What Is Real Estate Professional Status (REPS) and How Can ...

Single-family home with a For Rent sign, representing a short-term rental property used in real estate tax strategies.
Short-term rentals are more than a growing trend in real estate investing. They can also be a powerful tool for reducing taxes when used correctly. The short-term rental (STR) tax strategy allows investors to treat their rental losses as nonpassive, opening the door to offsetting W-2 wages, business income, and […]

How to Use the Short-Term Rental Tax Strategy to Reduce ...

Aerial view of a suburban neighborhood with single-family rental homes, symbolizing real estate investing and material participation for tax purposes.
How Material Participation Impacts Real Estate Taxes Material participation is one of the most important tax concepts for real estate investors to understand. This is what determines whether your activity is passive or nonpassive, and if you can use certain losses to offset other income. For many investors, qualifying as […]

Material Participation Guide for Real Estate Investors

Woman standing at a fork in a forest path, symbolizing the decision between passive and nonpassive real estate activities for tax purposes.
When it comes to taxes, not all income and losses are created equal. One of the most important distinctions real estate investors need to understand is the difference between passive and nonpassive activities. It’s a foundational concept that can either unlock powerful tax savings or leave you sitting on unused […]

Passive vs. Nonpassive Activities for Real Estate Investors: Why It ...

Tax Advisory vs Tax Preparation.
Tax law is complex, no matter your occupation or investments. For real estate investors, the tax landscape can be especially challenging to manage. This is why many investors recruit the help of professionals for tax advisory and tax preparation—but these two activities are not one and the same.

Tax Advisory vs. Tax Preparation

Nicholas Aiola, CPA - 3 Ways to Access Tax-Free Cash for Your Next Deal - Coin Jar
After weeks of digging, you find a home run deal for a new rental property to add to your portfolio. The asking price fits within your budget, the numbers work, and the cash flow is exactly what you’re looking for. There’s only one problem… You need cash to fund the […]

3 Ways to Access Tax-Free Cash for Your Next Real ...

Nicholas Aiola, CPA - Tax Implications of Seller Financing
If you’ve never heard of seller financing — AKA owner financing — in relation to real estate, the good news is it’s an easy concept to understand. The better news is that it could be a tax-advantaged strategy when selling your home. What Is Seller Financing? Seller financing in real […]

Seller Financing Tax Implications

Nicholas Aiola, CPA - Separate Bank Accounts: Don't Mix Business with Pleasure - Piggy Banks
One of the most common missteps I see with beginner investors is using one bank account (likely their personal checking account) for both personal expenses and rental income and expenses. Gasp! Most people don’t see this as a big deal but it could cause a host of problems both currently […]

Do You Need a Separate Bank Account For Your Rental ...

Nicholas Aiola, CPA - Expensing vs. Capitalizing Repair Costs -Tools on Table
I think it’s safe to say the debate on whether to capitalize or expense repair costs applies to every landlord. Show of hands… Who has never done a single repair on any property…ever. Anyone? I didn’t think so. The issue is determining whether the cost of repairs must be capitalized […]

Expensing vs. Capitalizing: A Guide To Categorizing Home Repairs and ...

Nicholas Aiola, CPA - Are You a Real Estate Professional? - Jumping Architect
I played baseball my entire childhood, all the way through high school. I enjoyed it and was fairly good at it, but I didn’t devote most of my time to it. Spoiler alert – I did not make it to the MLB as a professional baseball player. While there is […]

How To Qualify as a Real Estate Professional

Nicholas Aiola, CPA - Can You Deduct Your Rental Losses - Home
Normally, it’s not good news when you hear the word “losses” in connection with your business. Rental losses, however, can be a good thing. Keep in mind – we’re talking about rental tax losses, not rental cash flow losses. It is possible to generate positive cash flow from your rentals […]

Rental Losses – How Much Can Be Deducted?

Nicholas Aiola, CPA - A Real Estate Investor's Guide to Active vs. Passive Income - Arrows Road Sign
The goal of every investor is to generate more income than expenses incurred. As long as cash inflows exceed cash outflows, you’re happy – I mean, income is income, right? We’re dealing with two separate classes of income here – active and passive. There are major differences between the two […]

Active vs. Passive Real Estate Investing Guide

Nicholas Aiola, CPA - Can You Exclude Rental Income From Your Tax Return - House Split 4
We already know that owning rental property is a tax-friendly investment. Let’s take it one step further… What if your rental income isn’t taxed at all? I know what you might be thinking – income that doesn’t have to be reported on your tax return? Surely, you can’t be serious. […]

Can You Exclude Rental Income From Your Tax Return?

Nicholas Aiola, CPA - How to Avoid Taxes When Selling Your Home - Brick House
How would you like to pay no (or less) tax on the sale of your home, even if it appreciated in value? Whether you’re making a move for work, starting a family and needing to upsize, empty nesters looking to downsize, looking for a change in scenery, etc., you can […]

How to Avoid Taxes When Selling Your Home

Nicholas Aiola, CPA - Landlords: This Common Mistake Could Cost You Thousands of Tax Dollars - Keys
You just bought an investment property. It needs some cosmetic work, but nothing major. Whether it’s your first or tenth property, you’re excited. You’re eager to get started on the rehab so you can rent it out and begin earning some cash flow. You start the rehab right away. Two […]

Tax Deductions for Rental Properties: Avoiding a Costly Mistake

Nicholas Aiola, CPA - Depreciation Recapture: The Dark Side of Depreciation - Depreciation Recapture
So now that you know the ins and outs of depreciation and how great it can be for landlords, let’s take a closer look at the downside: depreciation recapture. Disclaimer: For the purposes of this article, we are only going to discuss depreciation recapture in relation to residential real property, […]

How to Avoid Depreciation Recapture on Real Estate