Question 1

Do Miami real estate investors need a CPA who specializes in real estate?

Accepted Answer

Real estate investors benefit from a CPA who understands the passive-activity loss rules, depreciation recapture, §1031 exchange mechanics, cost-segregation analysis, and STR material-participation tests — not just Schedule E data entry. A generalist CPA who prepares one Schedule E a year is unlikely to track suspended passive losses, model pre-sale recapture exposure, or advise on the §1031 timing requirements. Miami real estate investors typically have more tax complexity in their Schedule E than in the rest of their return combined.

Question 2

How does the §1031 exchange work for Miami investors?

Accepted Answer

A §1031 like-kind exchange defers capital gain and depreciation recapture from the relinquished property into a replacement property. The exchange must be structured through a qualified intermediary before the closing of the relinquished property. You have 45 days after the closing date to identify the replacement property and 180 days to close on it. Boot — cash or non-like-kind property received in the exchange — is taxable. We coordinate with your QI, prepare Form 8824, and track the deferred basis into the replacement property.

Question 3

What is the real estate professional designation and how do I qualify?

Accepted Answer

A taxpayer qualifies as a real estate professional under §469(c)(7) if (1) more than half of their personal-service hours for the year are in real property trades or businesses in which they materially participate, and (2) they perform more than 750 hours of services in those trades or businesses. Qualifying as a real estate professional converts rental activities from passive to non-passive — allowing rental losses to offset W-2 income, business income, and other non-passive income without limitation. We document the qualification with contemporaneous time logs, which are the single most important piece of evidence in an IRS examination of real estate professional status.

Question 4

What is cost segregation and is it worth it for Miami rental properties?

Accepted Answer

Cost segregation is an engineering study that reclassifies building components — flooring, cabinetry, electrical systems, parking lots — from 27.5-year or 39-year depreciation into shorter recovery periods (5, 7, or 15 years). Bonus depreciation (100% in 2023, phasing down under current law) allows immediate expensing of the reclassified components. The economics depend on your tax rate, the property value, and the holding period. We coordinate with cost-seg engineering firms and incorporate their study into your depreciation schedule.

Question 5

Are Miami fix-and-flip profits taxed as ordinary income?

Accepted Answer

Yes, in most cases. If you regularly buy, improve, and sell properties with the intent to resell at a profit — the IRS classifies this as dealer activity, and the gain is ordinary income taxed at your marginal rate, not the preferential long-term capital gain rate. Dealer classification also means the properties are inventory, not capital assets, which eliminates §1031 exchange eligibility and §121 exclusion eligibility. Holding periods, intent at acquisition, and the volume of transactions all affect the analysis. We advise on structuring before the purchase, not after the sale.

Question 6

How is NIIT calculated for Miami real estate investors?

Accepted Answer

The 3.8% Net Investment Income Tax (IRC §1411) applies to the lesser of (1) net investment income or (2) the excess of MAGI over the threshold ($200,000 single, $250,000 married). Net investment income includes net rental income, capital gains from property sales, and passive income. Real estate professionals with non-passive rental income are not subject to NIIT on that income. Planning NIIT exposure — through passive-to-non-passive reclassification or timing of property sales — is part of the pre-sale analysis we do for Miami real estate clients.

Question 7

Can I deduct rental losses if my income is above $150,000?

Accepted Answer

Not under the active-participation exception, which phases out entirely above $150,000 MAGI. Above that threshold, rental losses are suspended and carried forward unless you qualify as a real estate professional (who can deduct losses against ordinary income without limitation) or have passive income from other sources to absorb the passive losses. Suspended losses are not lost — they release when you dispose of the property in a taxable transaction.

Question 8

What is the §121 exclusion and can Miami investors use it?

Accepted Answer

The §121 exclusion allows a homeowner to exclude up to $250,000 ($500,000 married) of gain on the sale of a primary residence, provided they have owned and used the property as their primary residence for at least 2 of the 5 years before the sale. Miami investors who convert a rental property to a primary residence before selling may qualify for a partial §121 exclusion. Depreciation taken during the rental period is always recaptured under §1250 and is not excludable. We model the §121 eligibility and recapture exposure before the sale.

Question 9

Do Miami real estate investors need to file state returns in other states?

Accepted Answer

Yes, if they own rental properties in states with income tax. A Miami investor who owns a rental property in New York, California, or New Jersey must file a nonresident return in that state for the rental income earned there. Florida has no state income tax, so Florida-source income is not taxed at the state level — but out-of-state rental income is subject to the tax rules of the state where the property is located. We include multi-state nonresident returns up to the limit of your tier.

Question 10

How are partnership K-1s from real estate funds taxed for Miami investors?

Accepted Answer

Partnership K-1s from real estate funds include ordinary business income, capital gains, §1231 gains and losses, and separately stated items. The passive-activity rules apply to the investor's share of partnership losses based on the investor's level of participation — most limited partners are passive. Publicly traded partnership (PTP) K-1s are subject to special rules under §469(k) that prevent PTP losses from offsetting income from non-PTP sources. We track K-1 basis, passive-loss carryovers, and at-risk limitations annually.

CPA for Miami real estate investors.

Four types of Miami real estate investors we work with.

Condo and residential landlords

Fix-and-flip operators

Commercial property owners

Short-term rental (STR) hosts

The passive-activity rules are where most Miami investors pay too much.

Intake, depreciation, pre-sale planning, filing.

Property and basis intake

Depreciation and loss analysis

Pre-transaction planning

Filing and year-end review

Real estate investor engagements start at Growth.

Cassandra de la Fe — Florida CPA for Miami real estate investors.

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