Real Estate Articles

Accrual-basis businesses can reduce their 2025 tax liability by recognizing expenses incurred this year, even if payment occurs in 2026 including wages, taxes, and utilities. Reviewing prepaid expenses, writing off uncollectible receivables, and properly timing income and deductions are key strategies for year-end tax planning.

QIP offers businesses a way to accelerate deductions on nonresidential building improvements through bonus depreciation and Section 179 expensing. Recent legislation under the OBBB permanently reinstates 100% bonus depreciation for qualifying assets placed in service after January 19, 2025, while also increasing Section 179 limits. Strategic planning is essential to balance immediate tax benefits against potential future implications like depreciation recapture and excess business loss rules.

Correctly classifying workers as either employees or independent contractors is crucial to avoid costly consequences such as audits, back taxes, penalties, and lawsuits. Guidance is provided on understanding worker classification, the implications of misclassification, and the cautious use of Form SS-8 to request IRS determinations.

Understanding whether you qualify as a tax-favored real estate professional can significantly impact your ability to deduct rental losses. Here we explain the general rules, exceptions, and criteria that define this status, including the eligibility criteria and material participation tests. We also highlight other exceptions for non-professionals and emphasizes the importance of utilizing available tax breaks to maximize deductions and minimize tax liability.

The strategies for transferring business ownership include family transfers, trusts, employee buyouts, ESOPs, and sales to outside buyers. Each option is analyzed for its tax consequences, such as gift tax, estate tax, capital gains tax, and corporate deductions, providing a comprehensive guide to succession planning.

The tax implications of real estate gains can vary based on factors like property type, ownership structure, and depreciation. While long-term capital gains are generally taxed at 15% or 20%, certain gains, particularly those involving depreciation, may be taxed at higher rates. Additionally, the 3.8% Net Investment Income Tax (NIIT) and state taxes could also apply.

Understanding the tax implications of selling business property is crucial due to the complex rules involved, particularly regarding long-term capital gains and recapture rules. Different types of property, such as Section 1245 and Section 1250 properties, have specific tax treatments that must be carefully considered. For detailed guidance on specific transactions, professional consultation is recommended.

As part of year-end planning and looking ahead to the coming year, real estate businesses should review how current tax rules apply to their transactions and the effects of any changes to those rules.