The purchase and sale of investment property carry significant tax considerations, including opportunities for deductions and the necessity to understand various tax treatments for rental income and capital gains.  In this overview, we will cover:

  • Recognizing the tax implications of buying and selling investment property
  • Strategies for managing tax burdens on real estate investments
  • Key IRS rules and considerations for real estate investors

Before You Buy: Assessing Tax Implications

  • Selecting the Right Property
  • Financing: Mortgage Interest and Points
  • Predicting and Planning for Property Taxes

Owning Investment Property

  • Ongoing Deductions and Expenses
    • Mortgage Interest
    • Depreciation
    • Repairs and Maintenance
    • Management and Professional Fees
  • Rental Income and Taxes
    • Reporting rental income
    • Lease or Rental Agreements and Tax Implications

Selling Investment Property

  • Calculating Capital Gains and Losses
    • Short-Term vs. Long-Term Capital Gains
    • Determining Cost Basis
  • Section 1031 Like-Kind Exchanges
    • Criteria for a successful 1031 Exchange
    • Timeframes and Identification Rules
  • Reporting the Sale
    • IRS Form 4797 and Schedule D

Tax Strategies and Considerations

  • Depreciation Recapture
    • Understanding Section 1250 Property
  • Tax Loss Harvesting
    • Utilizing losses to offset gains
  • Passive Activity Losses and Limits
    • Rules for Deductibility

Final Thoughts

  • Year-end Planning for Investors
  • Future Trends in Real Estate Taxation
  • Resources and Expert Advice for Real Estate Investors


Detailed Bullet Points for the IRS Sections:

  • IRS References:
    1. Mortgage Interest Deduction: IRS Publication 936
    2. Property Depreciation: IRS Publication 527
    3. Reporting Rental Income, Expenses, and Losses: IRS Publication 527
    4. Section 1031 Like-Kind Exchanges: IRS Topic No. 409 and IRS Publication 544
    5. Capital Gains and Losses: IRS Publication 550
    6. Depreciation Recapture: IRS Publication 544
    7. Passive Activity Loss Limitations: IRS Publication 925