Real Estate
Every Property, Its Own Set of Numbers
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You own three buildings and each one's story lives somewhere different. The closing binder is in a drawer, the rent roll is in a spreadsheet, and the depreciation schedule lives inside last year's return. Then a lender asks for two years of property-level statements by Friday.
We are a CPA firm working with owners, developers and investor groups. Four things usually need sorting, and they tend to arrive in this order.
Books by property
We keep the books in QuickBooks Online with a class for each property, so rent, debt service and capital work stay sorted all year rather than being reconstructed in March. Capital work is separated from repairs as it happens, because that line is the difference between a deduction this year and basis you depreciate for decades. When a lender asks for two years of property-level statements, they already exist.
Acquisition and depreciation
Most of a real estate return is decided at closing. The purchase price and the settlement charges have to be split into what gets depreciated, what gets amortized over the loan term, and what simply becomes basis, and that allocation drives deductions for decades.
A cost segregation study reclassifies building components to shorter recovery lives and pulls deductions forward. 100% bonus depreciation is permanent for property acquired after 19 January 2025 — the acquisition date is the switch, not the placed-in-service date — which makes a study worth more than it was. The trade comes later, because the components a study identifies carry more ordinary-income recapture on a sale. The deduction and the recapture are two halves of one decision, and which way it goes depends on your position now and how long you intend to hold. We model both sides before you pay for a study.
Owners and investors
For partnerships and investor groups we maintain capital accounts, run waterfall allocations, and issue K-1s on a schedule investors can rely on.
Whether your losses reach your return is a separate question. The real estate professional test under section 469 asks for more than half of your personal services to be in real property trades or businesses in which you materially participate, and more than 750 hours. Qualifying does not by itself make rental losses non-passive: material participation in each rental activity is still required, or a grouping election. It is fact-dependent, it turns on records kept during the year rather than reconstructed after it, and we work it through with you rather than assuming it.
Sale or exchange
At disposition the calendar is unforgiving. A section 1031 like-kind exchange applies to real property only. You have 45 days to identify replacement property and 180 days to close, or the due date of the return including extensions, whichever is earlier. That earlier deadline is the trap: a sale late in the year can cut the 180 days short unless the return is extended.
State treatment is its own calculation. Many states decouple from federal bonus depreciation and cap section 179 expensing well below the federal limit; New Jersey, for example, still uses a definition frozen at 31 December 2002. A purchase deducted in full federally is often deducted over years for state purposes, and that gap belongs in the plan rather than in a surprise the following April.
Common questions
Do I need a cost segregation study?
Sometimes, and it is worth knowing which before you pay for one. A study pulls deductions forward and it increases the ordinary-income recapture waiting at sale, so the answer depends on your tax position now and how long you intend to hold. We model it both ways first.
Can you handle properties in more than one state?
Yes. We file federal and state returns in all fifty states. State treatment of depreciation and of nonresident income differs enough that it belongs in the plan rather than being discovered at filing.
My depreciation was never set up properly. Is that fixable?
Often, and not one year at a time — there is a procedure that claims the whole missed amount in the current year rather than amending back. The first article below walks through it. Send us the closing statement and the last filed return and we will tell you what is available on your facts.
This page is about whether we recognize your situation. The technical branches — how the gain on a sale splits between section 1245 and section 1250 property, the section 163(j) election for a real property trade or business, and the state-by-state depreciation differences — are worked through in the Real Estate Investor Tax Playbook and in the articles below.