Tax Reference

Real Estate Tax

Investment property, rental income, depreciation, 1031 exchanges, and passive activity rules.

Real estate generates some of the most complex tax situations in the code - §1231 gains, three layers of depreciation recapture, passive activity limitations, and the 1031 exchange framework for indefinite deferral. This section covers everything from the basics of rental income reporting to sophisticated exit strategies.

Core Real Estate Rules

Real Estate Tax Guide

§1231, §1250 recapture, dealer vs. investor, passive activity, cost segregation.

Depreciation Recapture

§1245, §1250 at 25%, bonus recapture, §751 hot assets.

Passive Activity Loss

$25K offset, real estate professional election §469(c)(7).

Qualified nonrecourse financing exception for real property.

Real Estate Professional Status §469(c)(7)

REPS two-part test: 750 hours + more-than-half personal services in real property T or B with material participation. 11 categories. §1.469-9(g) aggregation election. Material participation 7 tests. Rev. Proc. 2011-34 late aggregation. STR 7-day loophole. §1411 NIIT 500-hour safe harbor. Self-rental trap. Audit defense.

§1031 Like-Kind Exchange: Deep Dive

Section 1031 complete mechanics post-TCJA and OBBBA. Real property only since 2018. OBBBA July 4, 2025 PRESERVED §1031 unchanged - rejected proposed $500K caps. 45-day identification, 180-day exchange (or return due date). Q4 trap October 17 onward. Qualified Intermediary Reg §1.1031(k)-1(g)(4) safe harbor. Three-property / 200% / 95% identification rules. Reverse exchange Rev. Proc. 2000-37 with EAT parking. §121 coordination Rev. Proc. 2005-14. Related-party 2-year rule §1031(f). 15% incidental personal property rule Reg §1.1031(a)-3. New §1062 farmland deferral added by OBBBA.

§121 Home Sale Exclusion: Deep Dive

Section 121 complete mechanics. $250,000 single / $500,000 MFJ unchanged since Taxpayer Relief Act 1997 - NOT inflation-indexed. OBBBA did not modify. 2-of-5 ownership and use tests (730 days). Surviving spouse $500K within 2 years §121(b)(4). Nonqualified use ratio §121(b)(5) with TRAILING period exception (post-residence rental within 5-year window EXEMPT). Depreciation recapture max 25% §121(d)(6). Partial exclusion safe harbors: 50-mile employment, physician health, unforeseen circumstances. Military 10-year suspension §121(d)(9). §1031 replacement 5-year holding §121(d)(10). 2026 LTCG brackets per Rev. Proc. 2025-32.

Depreciation

Depreciation Calculator

MACRS, bonus depreciation, adjusted basis.

Bonus Depreciation

100% permanent under OBBBA. Cost segregation interaction.

Vehicle Depreciation

§179, luxury auto limits, SUV exception.

Section 179 & Safe Harbor

De minimis safe harbor, §179 expensing.

Transactions & Exit

1031 Exchange Overview

Like-kind exchanges, QI requirement, basics.

1031 Exchange Deep Dive

Boot, 45/180-day rules, reverse exchanges, related party.

1031 Exchange Calculator

Boot, deferred gain, basis in replacement property.

Section 121 Exclusion

$250K/$500K home sale exclusion, ownership/use tests.

Opportunity Zones

Defer and exclude capital gains.

Florida Property Tax

Homestead exemption, SOH cap, portability.

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