Real estate investors in Buckhead and Vinings tend to own a particular kind of portfolio. A condo or two along Peachtree kept after a move, a townhome in Vinings bought as a rental, a small multifamily building or a share in a syndication, and increasingly a short-term rental aimed at business travelers. The properties are valuable, the numbers are meaningful, and the tax outcome depends heavily on decisions that were made, or not made, long before the return is prepared.
This guide is for investors who already understand the basics of rental income and want to know where a real estate investor CPA actually adds value: how properties are held, whether losses can be used, how to accelerate deductions, and what happens when you sell.
Start with the structure you will want at exit
How a property is owned affects liability, financing, estate planning and taxes, and it is much easier to set up correctly at purchase than to change later.
- A limited liability company per property, or per group of properties, is a common way to separate liability. A single-member LLC owned by an individual is generally disregarded for federal income tax purposes unless it elects corporate status, so the rental still appears on the owner’s personal return.
- Partnership tax treatment is the usual choice when investors co-own property. It allows income, losses and cash flow to be allocated according to the deal, and it gives flexibility when a partner exits.
- S corporations are usually a poor fit for appreciated real estate. Distributing property out of an S corporation is generally treated as a sale at fair market value, which can trigger tax on appreciation with no cash to pay it.
Moving an existing mortgaged property into an LLC also raises lender and title questions, so the tax analysis should be coordinated with the loan documents and your title insurer before anything is deeded.
Why rental losses often do not reduce your other income
Depreciation, interest and operating costs frequently produce a tax loss on a rental that is profitable in cash terms. Whether that loss can offset salary or business income is a separate question, answered by the passive activity loss rules.
Rental activities are generally passive. Passive losses can offset passive income, but not wages or active business income. There is a limited exception: individuals who actively participate in a rental real estate activity, and generally own at least 10% of it, can deduct up to $25,000 of losses against other income, but that allowance phases out as modified adjusted gross income rises from $100,000 to $150,000. Many Buckhead investors are above that range, which means their losses are suspended.
Suspended losses are not lost. They carry forward and can be used against future passive income, and they are generally released when the investor disposes of the entire interest in the activity in a fully taxable transaction with an unrelated party. Our post on freeing suspended passive losses covers how that release works.
Real estate professional status and the short-term rental route
Two paths can make rental losses non-passive.
Qualifying as a real estate professional
A taxpayer qualifies if more than half of the personal services they perform in trades or businesses during the year are in real property trades or businesses in which they materially participate, and they perform more than 750 hours of services in those businesses. On a joint return, one spouse must meet both tests alone. Hours worked as an employee generally do not count unless the employee owns more than 5% of the employer.
Qualifying is only the first step. The investor must also materially participate in the rental activities themselves, which is why many real estate professionals make an election to treat all of their rental interests as a single activity. That election has long-term consequences and should not be made casually.
For someone with a full-time job outside real estate, the more-than-half test is very difficult to meet. The IRS knows this, and it regularly challenges the status, particularly when hours are reconstructed from memory after the fact.
Short-term rentals
A property where the average period of customer use is seven days or less is generally not treated as a rental activity under the passive loss rules. If the owner materially participates in running it, losses can be non-passive without real estate professional status. This is one reason short-term rentals near Buckhead’s business district have attracted high-income investors. The material participation tests are strict, and local short-term rental regulations should be checked before buying.
Cost segregation on Buckhead and Vinings properties
A cost segregation study breaks a building’s purchase price into components that can be depreciated faster than the building itself, such as certain fixtures, finishes, site improvements and land improvements. Following the 2025 federal tax law, qualifying property acquired and placed in service after January 19, 2025 is generally eligible for 100% bonus depreciation, which makes those shorter-life components deductible in the first year.
Whether a study is worth it depends on the numbers. It generally makes more sense for larger properties, for investors who can actually use the losses, and for properties that will be held long enough that the accelerated deductions are not quickly recaptured. Georgia does not follow federal bonus depreciation, so the benefit on the Georgia return is smaller.
Selling, exchanging or holding
Every depreciation deduction reduces your basis, and the bill for that arrives at sale. A few rules shape the decision:
- Depreciation recapture. For individuals, long-term gain attributable to depreciation on real property, known as unrecaptured Section 1250 gain, is generally taxed at a maximum federal rate of 25%, and gain on shorter-life components identified in a cost segregation study can be taxed as ordinary income to the extent of prior depreciation.
- Net investment income tax. Rental income and gains can be subject to an additional 3.8% tax for higher-income taxpayers, unless the income is derived in the ordinary course of a trade or business that is not passive to the investor.
- Like-kind exchanges. A Section 1031 exchange can defer gain when investment or business real property is exchanged for other like-kind real property. Replacement property must be identified within 45 days of the sale and acquired within 180 days, or by the due date of the return including extensions if that is earlier, and the seller must not receive the sale proceeds, which is why a qualified intermediary is typically used to hold them. Cash or debt relief received in the exchange is generally taxable.
- Selling from out of state. Georgia generally requires the buyer to withhold 3% of the purchase price, limited to the seller’s net proceeds, when a nonresident sells Georgia real property, unless an exemption applies or withholding is computed on the gain using the state’s affidavit. Investors who have moved away from Atlanta should plan for this before closing.
Records that make all of this work
- A separate bank account for each property or entity.
- Closing statements for every purchase, refinance and sale.
- A running record of improvements versus repairs, since improvements are capitalized and repairs are generally deductible.
- A contemporaneous log of hours, if you rely on material participation or real estate professional status.
- Copies of leases, property management statements and platform reports for short-term rentals.
Working with our Atlanta team
Manay CPA’s Atlanta office works with individual investors, partnerships and developers across Buckhead, Vinings and the wider metro area. We prepare tax returns for real estate investors, set up holding LLCs and advise on acquisitions, exchanges and exits. For more on rental income and the qualified business income deduction, see our Section 199A guide, or read about our work in real estate.
Frequently asked questions
Can rental losses offset my salary?
Usually not directly. Rental losses are generally passive and can only offset passive income. Taxpayers who actively participate may deduct up to $25,000 against other income, but that allowance phases out between $100,000 and $150,000 of modified adjusted gross income. Unused losses carry forward.
What counts as a real estate professional for tax purposes?
More than half of your personal services in all trades or businesses during the year must be in real property trades or businesses in which you materially participate, and those services must exceed 750 hours. On a joint return, one spouse must meet both tests alone.
Is a cost segregation study worth it for a single condo?
Often not. The benefit depends on the value of the property, the share of cost that can be reclassified to shorter lives, how long you will hold it, and whether you can use the losses. It tends to make more sense for larger or multifamily properties.
How long do I have to complete a 1031 exchange?
You must identify replacement property within 45 days of selling the relinquished property and complete the purchase within 180 days, or by the due date of your tax return for that year, including extensions, if that comes first.
Talk to us
If you own investment property in Buckhead or Vinings and want to know whether your structure, losses and exit plan are working for you, we can review your portfolio and returns. Book a consultation with our Atlanta team.
