CalculateRealEstateROI

Investing

What are the main tax benefits of rental real estate?

Depreciation, mortgage interest deduction, operating expense deductions, 1031 exchanges, cost segregation, and step-up basis at death.

Reviewed by Keiron Brown, Founder & Editor, CalculateRealEstateROI · Educational estimates only — not investment, financial, tax, or legal advice

Direct answer

Depreciation, mortgage interest deduction, operating expense deductions, 1031 exchanges, cost segregation, and step-up basis at death.

Expanded explanation

Depreciation alone often shelters most or all of rental cash flow from federal tax. Cost segregation accelerates deductions and, with bonus depreciation, can generate large paper losses. Real Estate Professional Status unlocks offset against W-2 income. At death, step-up basis eliminates all deferred gain and recapture for heirs.

Examples

  • $10k depreciation + $14k interest deducted against $20k rental income = paper loss.

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