Investment Property: Knowing What You Can Write Off on Your Taxes

 Investment Property: Knowing What You Can Write Off on Your Taxes

It takes careful planning to provide for your income in retirement, and real estate investments offer fantastic tax benefits to investors. These laws exist to encourage investments in the real estate market through incentives. Missed opportunities to keep more of your income can add up over time, and knowing what you can write off the taxes on your investment property can help guide your decisions and increase your profits over the long term. But, of course, real estate investing is a business, so you should treat it as such. In addition, each of these laws has qualifiers and complex nuances, so it is always recommended you work with a tax advisor to help. 

You should begin developing methods in your daily work habits that improve your odds of building a prosperous portfolio. Organized record keeping is imperative, so you will want to develop a system that makes it easy for you to succeed. It is disheartening to consider the profits that uninformed real estate investors allow to slip through their fingers because of disorganization; you will need those receipts. Missed opportunities to keep more of your income add up over time. In addition, understanding what is not an allowable deduction can keep you from veering off the pathway to deductions.

If you would like to avoid missing out on your allowable deductions and be more prepared for meeting with a tax professional, read more about what you can write off of the taxes on your investment property.

Passive or Non-Passive

It’s essential to consider the differences between passive and non-passive real estate investment income and how tax law treats each. You can further benefit from these tax laws if you are not a material participant in your real estate investment business. In other words, as a passive investor, you can write off the taxes on your investment property through passive losses on your passive income. Document the time you spend actively participating in business activities and whether you wish to be treated as a real estate professional when you file your taxes. Suppose you spend more than half of your time participating in business activities or more than 750 hours. Then, you may be considered a “qualified” real estate professional in the eyes of the IRS.


If it has to do with your investment properties and isn’t an improvement, but a necessary part of maintaining, managing, or the expenses you may incur for operations in your portfolio, are all areas of allowable deductions for real estate investors on your investment property.


One of the most considerable allowances to lower your taxes on your investment property is through depreciation. While depreciation involves no cash flow, it allows for a deduction from the taxable income based on gradual deductions. Each real estate investment asset class falls under different timelines. The land is always in the process of appreciating, so depreciation is only for the improvements.

Pass-Through Deduction

You should also be aware that you can write off the taxes on your investment property through the pass-through deduction, or the Section 199A Qualified Business Income (QBI) deduction is in effect until the end of 2025 and allows for a 20 percent deduction on income from rentals on qualifying properties.

Capital Gains

You should also know how capital gains can affect the taxes on your investment property. Maximizing your deductions requires understanding the difference between short and long-term capital gains and how to strategize to make the most of this benefit.

Incentive Programs

You should also be aware that you can write off the taxes on your investment property through 1031 exchanges and investing in opportunity zones. In addition, you may defer the profits on selling a property with a 1031 exchange until you sell the following property; unless you decide to reinvest, you can continue deferring the profits. However, with a qualified opportunity zone fund, you may defer until the property sells or on December 31, 2026, whichever comes first. 

Special Loss Allowance

You should also be aware that through the special loss allowance, you can write off up to $25,000 of the taxes on passive income for your investment property for qualifying individuals.

Why not work with a team of professionals experienced in real estate investments that stay up-to-date on how current tax laws affect investors, like a local professional investor at Modern Properties Solutions? When you work with our professional investors at Modern Properties Solutions, we will help you find the perfect property for your investment strategy so you can write off the taxes on your investment property. Let the pros at Modern Properties Solutions help you earn the highest possible returns on your investment dollar. And don’t forget to ask about our current inventory of the best properties available. Call Modern Properties Solutions at 844-978-0005.

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