Real estate offers some of the most favorable tax treatment available to investors in the U.S. tax code, but taking full advantage requires proactive planning with a qualified CPA — these are not strategies that happen automatically just because you own investment property.

Depreciation is the foundational one: the IRS allows investors to deduct a portion of a property’s value each year as a non-cash expense, which can meaningfully reduce taxable income even on a property that is cash-flow positive. Cost segregation takes this further by identifying components of a property that can be depreciated on an accelerated schedule, front-loading deductions into earlier years rather than spreading them evenly over the property’s full depreciable life.

1031 exchanges, covered in more detail elsewhere in our Insights library, allow investors to defer capital gains tax when reinvesting proceeds into a new like-kind property — a powerful tool for investors actively growing a portfolio rather than looking to cash out. For investors who qualify as real estate professionals under IRS rules, real estate losses can also offset other active income in ways that are not available to passive investors, though the qualification requirements are specific and worth reviewing carefully with a CPA.

None of these strategies should be pursued without professional guidance specific to your situation — tax law is nuanced, and the right approach depends on your broader financial picture. Steve Ford’s Corporate World division works alongside investors’ CPAs to help identify which of these tools are relevant to their specific portfolio and timeline.