Introduction: The December Deadline
Every year, the fourth quarter presents a narrow window for strategic tax planning. For real estate investors managing substantial portfolios, the decisions made between now and December 31st can materially impact after-tax returns for years to come.
The difference between passive tax management and active tax strategy often measures in the hundreds of thousands of dollars. Yet most investors wait until March to think about taxes, when the only option left is to write the check. The sophisticated operators I know treat tax planning as an ongoing discipline. They understand that real estate offers some of the most powerful tax advantages available in the U.S. tax code, but only if you know how to access them.
At Carbon, we approach tax strategy the same way we approach underwriting. Every decision must be defensible, every deduction documented, and every strategy aligned with our long-term investment thesis. Tax efficiency is not about cutting corners. It is about using the tools Congress specifically designed to incentivize real estate investment and capital formation.
This piece examines the strategies that matter most before year-end. Some require immediate action. Others demand careful planning for early next year. All of them share one principle: protecting the downside through intelligent tax planning while capturing upside through disciplined execution.
Cost Segregation: Accelerating Depreciation Before Year-End
Cost segregation represents one of the most underutilized tools in commercial real estate. The concept is straightforward. When you acquire a property, the IRS allows you to depreciate the building over 27.5 years for residential property or 39 years for commercial property. However, many components of that building can be reclassified into shorter depreciation schedules.
A cost segregation study identifies assets that qualify for five-year, seven-year, or 15-year depreciation instead of the standard timeline. This includes items like carpeting, specialized electrical systems, landscaping, and parking lot improvements. By accelerating depreciation on these components, you create larger paper losses in the early years of ownership, which offset other income.
The mechanics matter. When you conduct a cost segregation study on a property acquired this year, you can claim those accelerated deductions on your current-year tax return. For a property with a $5 million depreciable basis, a typical study might reclassify $1.5 million into shorter-life assets. That reclassification can generate hundreds of thousands in additional first-year deductions.
Recent legislation has dramatically enhanced the value of this strategy. The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently restored 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. This represents a transformative shift from the scheduled phase-down that had reduced bonus depreciation to 60% in 2024 and was set to continue declining to 40% in 2025.
The new law creates a bifurcated system. Property acquired before January 20, 2025 still follows the phase-down schedule. Property acquired after that date qualifies for immediate 100% expensing. This means an asset placed in service in late January 2025 or later receives full bonus depreciation, while an asset placed in service in early January follows the 40% schedule.
For investors who have not yet conducted studies on recently acquired properties, December represents the deadline for maximizing this year's benefit. A study completed before year-end allows you to file with full deductions. A study completed in January means waiting until next year's return.
The cost of a proper study typically ranges from $5,000 to $15,000, depending on property complexity. The return on that investment often exceeds 10 to 1 in tax savings. More importantly, the study creates a defendable record should the IRS ever question your depreciation schedule.
One critical consideration: cost segregation creates ordinary income recapture upon sale. When you eventually dispose of the property, the accelerated depreciation gets recaptured at ordinary income rates rather than capital gains rates. This makes the strategy most effective for long-term holds where the present value of current deductions outweighs future recapture costs, or when paired with 1031 exchanges that defer the recapture indefinitely.
Strategic 1031 Exchange Planning: Timing and Execution
The 1031 exchange remains the single most powerful tax deferral tool available to real estate investors. When executed properly, it allows you to sell appreciated property, reinvest the proceeds into new property, and defer all capital gains taxes indefinitely.
The mechanics create natural urgency around year-end planning. Once you close on the sale of your relinquished property, you have exactly 45 days to identify potential replacement properties and 180 days to close on at least one of them. However, sophisticated investors need to understand a critical nuance: the 180-day deadline is actually the earlier of 180 days or your tax return due date, including extensions.
This timing rule catches many investors by surprise. If you sell a property in late December without filing for a tax extension, you may only have until April 15th to complete your exchange. That gives you approximately 116 days instead of the full 180. Filing for an automatic six-month extension before your return due date protects the full 180-day window. This is why experienced exchangers file extensions proactively, even when not needed for return preparation.
For investors selling property in November or December, those deadlines extend into the following year, creating breathing room for replacement property selection. The inverse is also true. If you are targeting properties for acquisition in early 2025, identifying sellers now who might benefit from 1031 exchange structures can unlock deals that would not otherwise come to market. Sellers facing significant capital gains often need buyers willing to accommodate tight closing timelines. Being that buyer creates negotiating leverage.
The rules around 1031 exchanges are strict and unforgiving. You must use a qualified intermediary to hold the proceeds. You cannot touch the money between transactions. The replacement property must be of equal or greater value, and all equity and debt must be replaced to achieve full deferral. Even small mistakes can disqualify the entire exchange and trigger immediate tax liability.
For investors with multiple properties, the opportunity to consolidate or diversify through exchanges creates strategic optionality. Selling three smaller properties and exchanging into one larger asset simplifies management while preserving tax deferral. The reverse is equally valid. Exchanging one large property into multiple smaller assets can diversify geographic or market risk.
The most sophisticated investors think about 1031 exchanges not as isolated transactions but as components of a decades-long tax deferral strategy. Each exchange pushes the tax liability further into the future. The longer you defer, the more time your capital compounds on a pre-tax basis. When structured properly, these exchanges can continue through generations via step-up in basis at death, potentially eliminating the tax liability entirely.
December planning requires honesty about exit timing. If you are considering selling a property in the next 18 months, the year-end period offers time to structure the transaction correctly, line up qualified intermediaries, and begin identifying potential replacement candidates before you need them.
Opportunity Zone Investments: Understanding the Current Landscape
Opportunity Zones represent Congress's most significant tax incentive for long-term real estate investment in underserved communities. For investors with embedded capital gains from any source, not just real estate, these investments historically offered three distinct benefits: deferral of the original gain, reduction of that gain through basis step-ups, and complete elimination of taxes on appreciation within the Opportunity Zone investment if held for 10 years.
The mechanics require careful attention to timing and current law. You have 180 days from the date of a capital gain to invest in a Qualified Opportunity Fund. For gains recognized earlier in 2024, that window may already be closing. For gains that will be recognized in December, the 180-day clock starts ticking as the year ends.
However, the legislative landscape has fundamentally changed. The One Big Beautiful Bill Act made the Opportunity Zone program permanent, but the original deferral benefits have largely expired. The five-year holding requirement for a 10% basis step-up required investment by December 31, 2021. The seven-year requirement for an additional 5% step-up expired for investments made after December 31, 2019.
What remains is still powerful: complete exclusion of capital gains on appreciation within the Opportunity Zone investment if held for 10 years. Additionally, existing QOF investments must recognize deferred gains by December 31, 2026, or upon an earlier inclusion event. This 2026 deadline applies regardless of when you made the initial investment.
The new permanent program also modifies eligibility. Original Opportunity Zones designated in 2018 remain valid through 2028. Starting in 2029, the program shifts to a rolling designation system based on census tracts meeting poverty and median income thresholds, with potential for new zones to be added every five years.
The structure matters as much as the timing. Opportunity Zone investments must be made through Qualified Opportunity Funds, which must invest at least 90% of their assets in Qualified Opportunity Zone property. The fund must also meet specific holding and active business requirements to qualify for the full tax benefit.
Critics have pointed out that Opportunity Zone investments can create conflicts between tax optimization and investment fundamentals. The 10-year hold requirement locks capital into long-term illiquid positions. The geographic restrictions limit investment opportunities to designated census tracts, some of which may not represent ideal risk-adjusted opportunities.
The counterargument is equally compelling. For investors with substantial unrealized gains who would otherwise face immediate tax liability, Opportunity Zones offer a path to defer and potentially eliminate that tax while investing in real assets. The 10-year horizon aligns with institutional investment timeframes, and many designated zones sit in the path of progress where demographic and economic trends support long-term appreciation.
At Carbon, we evaluate Opportunity Zone investments with the same rigor we apply to any acquisition. The tax benefits are real, but they cannot fix bad fundamentals. Properties in Opportunity Zones must still generate appropriate risk-adjusted returns on a pre-tax basis. The tax benefits should enhance returns, not justify them.
For investors considering Opportunity Zone deployment before year-end, the key decision is whether you have realized or will realize gains that could benefit from the appreciation exclusion. If you sold appreciated stock, business interests, or real estate earlier this year, December may represent your last opportunity to start the 180-day clock for 2024 gains.
Year-End Capital Expenditure Decisions
The timing of capital expenditures can materially impact current-year deductions through Section 179 expensing and bonus depreciation rules. Section 179 allows businesses to immediately expense qualifying property placed in service during the tax year, subject to income limitations. The 2024 deduction limit is $1,220,000 with a phase-out threshold beginning at $3,050,000 of qualifying property purchases.
Looking ahead, the One Big Beautiful Bill Act increased the 2025 Section 179 limit to $2,500,000 with a phase-out threshold of $4,000,000. This dramatic expansion creates significant opportunities for investors planning major equipment purchases or qualifying real property improvements in early 2025.
Bonus depreciation, now permanently restored at 100% for property acquired after January 19, 2025, allows immediate deduction of qualifying property costs. For real estate investors, this creates strategic decisions around renovation timing. If you planned major capital improvements for early 2025, accelerating that work into December 2024 generates immediate deductions at the 60% rate. Alternatively, pushing those expenditures into late January 2025 or later captures the full 100% bonus depreciation.
The definition of "placed in service" matters. Property must be ready and available for its intended use by December 31st to qualify for current-year deductions. Simply signing a contract or making a down payment is insufficient. The work must be substantially complete and the property must be capable of being used.
For properties undergoing value-add repositioning, the timing of completion can swing tax liability by hundreds of thousands of dollars. A property that stabilizes in December generates a full year of depreciation plus accelerated deductions from cost segregation. A property that stabilizes in January generates no current-year benefit but may qualify for enhanced bonus depreciation under the new rules.
The same logic applies to capital purchases like vehicles, equipment, and furniture used in property management operations. Purchases made in December 2024 qualify for Section 179 expensing and 60% bonus depreciation. Purchases made after January 19, 2025 qualify for 100% bonus depreciation, effectively eliminating any difference between Section 179 and bonus treatment for most investors.
One critical consideration for December purchases: the restoration of 100% bonus depreciation means that delaying purchases into late January may actually provide better tax results than accelerating them into December, particularly for investors who lack sufficient income to utilize the full Section 179 deduction in 2024. Running scenarios with your tax advisor becomes essential.
Passive Activity Loss Management
Real estate generates substantial paper losses through depreciation, but those losses face significant limitations under passive activity loss rules. For most investors, rental real estate activities are passive, meaning losses can only offset passive income. Excess losses carry forward but cannot offset wages, business income, or investment income.
Two exceptions create planning opportunities. The first is the real estate professional exception. Taxpayers who spend more than 750 hours per year in real property businesses and materially participate in those activities can treat rental losses as non-passive, allowing them to offset other income sources. The IRS scrutinizes this classification heavily, requiring contemporaneous time logs and clear documentation that the real property business constitutes the taxpayer's primary occupation.
The second is the $25,000 special allowance for active participants in rental real estate. This allowance phases out for taxpayers with adjusted gross income between $100,000 and $150,000, disappearing entirely at the upper threshold. The allowance requires active participation, meaning involvement in management decisions such as approving tenants, setting rental terms, and approving capital expenditures, plus at least 10% ownership. Married filing separately taxpayers who live together receive no allowance, creating a significant penalty for that filing status.
Year-end planning requires understanding your passive loss carryforwards and assessing whether you can utilize them through careful structuring. For investors with substantial suspended losses, generating passive income through other real estate investments can unlock those deductions. This is one reason why balancing cash-flowing stable assets with value-add properties undergoing renovation creates tax synergies. The stable assets generate passive income that can absorb passive losses from repositioning plays.
The Qualified Business Income deduction adds another layer of complexity. Pass-through entity owners can deduct up to 20% of qualified business income, subject to various limitations. For real estate investors operating through partnerships or LLCs, this deduction can meaningfully reduce effective tax rates. However, rental real estate only qualifies under specific circumstances.
The IRS safe harbor under Revenue Procedure 2019-38 provides certainty for rental real estate investors. To qualify, you must maintain separate books and records for each rental enterprise, perform at least 250 hours of rental services annually per enterprise, and keep contemporaneous records documenting time spent. Triple net leases are explicitly excluded. The return must include a statement claiming safe harbor treatment.
For taxpayers above the income thresholds of $383,900 for married filing jointly, the W-2 wage and unadjusted basis immediately after acquisition limitations apply. Real estate investors benefit significantly from the 2.5% of UBIA component given their substantial depreciable property basis, though the complexity of these calculations requires professional guidance.
December planning requires projecting your total passive income and losses for the year. If you have suspended passive losses that could be utilized, generating additional passive income before year-end captures those deductions. If you lack passive income to offset current losses, consider whether pursuing real estate professional status or the rental safe harbor makes sense for your situation.
Strategic Property Dispositions and Acquisitions
The timing of property sales and acquisitions creates tax planning opportunities beyond 1031 exchanges. For properties held longer than one year, long-term capital gains rates apply: 0%, 15%, or 20% depending on income levels. For 2024, married couples filing jointly pay 0% on gains up to $94,050 of taxable income, 15% on gains between $94,051 and $583,750, and 20% above that threshold. Single filers have lower thresholds.
Additionally, the 3.8% Net Investment Income Tax applies to the lesser of net investment income or modified adjusted gross income exceeding $250,000 for married filing jointly or $200,000 for single filers. These thresholds have never been indexed for inflation since the tax was introduced in 2013, meaning more taxpayers trigger this additional tax each year as income rises with inflation.
For properties held less than one year, ordinary income rates apply, which can reach 37% at the federal level plus state taxes. This creates natural planning around holding periods. A property acquired in January 2024 becomes eligible for long-term capital gains treatment after January 2025. Selling in December results in short-term treatment. Selling in January drops the effective federal rate by potentially 17 percentage points when combining the difference between ordinary income and long-term capital gains rates. On a $1 million gain, that timing difference is $170,000 in additional federal tax before considering state impacts.
The same logic applies in reverse for properties showing losses. If you have a property worth less than your basis, selling it generates a deductible loss. Timing that loss to offset other gains or income can reduce your overall tax liability. Critically, the wash sale rules that apply to securities do not apply to real estate. This allows for more flexible tax loss harvesting strategies, including selling and immediately repurchasing similar or even identical property to recognize losses while maintaining market exposure.
For investors with properties in appreciated markets, the decision to sell before year-end versus waiting until January must factor in both tax timing and market conditions. If you believe the market will remain strong, deferring the sale into January captures both long-term capital gains treatment and an additional year of ownership, which can compound returns. If you are concerned about market softness, taking the gain this year, even at higher short-term rates, may be preferable to holding through a downturn.
One often overlooked strategy is installment sale treatment, where you structure the sale to receive payments over multiple years. This spreads the gain recognition across tax years, potentially keeping you in lower brackets and reducing overall tax liability. For sellers willing to accept deferred payment terms, this can be more valuable than receiving cash upfront and paying immediate tax on the full gain.
The Refinance Alternative to Sale
One of the most powerful tax planning strategies in real estate is also the simplest: refinancing instead of selling. When you refinance a property, you can pull cash out without triggering any tax liability. The proceeds are debt, not income, so they are completely tax-free. This allows you to access your equity, redeploy capital into new investments, and continue enjoying the tax benefits of ownership including depreciation and future appreciation.
For investors who have owned properties through substantial appreciation cycles, refinancing can provide liquidity without the capital gains bill that comes with a sale. A property purchased for $1 million and now worth $3 million represents a $2 million gain if sold. At combined federal and state rates approaching 30% or higher in some jurisdictions, that sale could trigger $600,000 or more in taxes. Refinancing at 75% loan-to-value generates $2.25 million in proceeds, tax-free, while preserving your ownership and future appreciation potential.
The trade-off is leverage. Refinancing increases your debt service, which reduces cash flow and increases financial risk. For properties with strong cash flow and stable operations, this trade-off is manageable. For properties with thin margins or high vacancy risk, the additional debt can become problematic.
Year-end planning around refinancing requires assessing current interest rate conditions, property valuations, and your overall leverage position. For investors who planned to sell properties simply to generate liquidity, refinancing may accomplish the same objective without the tax cost. For investors comfortable with their current leverage, selling and paying the tax may make more sense than adding debt.
The decision often comes down to your conviction about long-term appreciation. If you believe a property will continue to increase in value, refinancing allows you to access today's equity while participating in tomorrow's appreciation. If you believe the property has maximized its potential, selling and redeploying into higher-growth opportunities may justify the tax cost.
Documentation and Substantiation
Every tax strategy lives or dies based on documentation. The IRS does not simply accept your deductions at face value. You must be able to prove every material claim with contemporaneous records, professional studies, and clear paper trails.
For cost segregation studies, this means engaging qualified professionals who follow IRS guidelines and produce detailed engineering reports. Look for firms with Certified Cost Segregation Professional credentials and a track record of successful IRS audits. For 1031 exchanges, it means maintaining clean records of all transactions through your qualified intermediary and understanding that even minor procedural violations can disqualify the entire exchange.
For passive loss utilization, it means contemporaneous time logs demonstrating material participation or active participation. Attempting to recreate these records after the fact during an audit virtually guarantees disallowance. For real estate professional status, the burden of proof is on the taxpayer to demonstrate that real property trades or businesses constitute more than half of personal services and exceed 750 hours annually.
For the QBI deduction rental safe harbor, documentation requires maintaining separate books and records for each rental enterprise, tracking the 250 hours of rental services with contemporaneous logs, and attaching the required statement to your return. Missing any element disqualifies the safe harbor and forces you to meet the more stringent Section 162 trade or business test.
December is the last opportunity to ensure your documentation is complete for the current tax year. Missing receipts cannot be recreated in March. Inadequate time logs cannot be corrected after the fact. The IRS increasingly scrutinizes real estate deductions, particularly around conservation easements, cost segregation, and real estate professional status. Inadequate documentation transforms legitimate deductions into audit targets.
The cost of proper documentation is minimal compared to the tax benefit and audit protection it provides. A well-documented position survives scrutiny. A poorly documented position, even if technically correct, may not survive the stress of an audit.
The Compounding Effect of Tax Efficiency
The real power of tax-advantaged strategies becomes apparent over time through compounding. When you defer $100,000 in taxes through a 1031 exchange, you are not just saving $100,000 today. You are keeping that capital working on your behalf, generating returns that compound tax-free until eventual disposition.
The math is striking. Assume an investor sells a property with a $500,000 gain. At combined federal and state rates of 30%, that creates a $150,000 tax bill, leaving $350,000 to reinvest. Through a 1031 exchange, the investor keeps the full $500,000 working. At 8% returns, the difference in after-tax wealth after 10 years exceeds $300,000. After 20 years, it exceeds $800,000.
This compounds further when paired with other strategies like cost segregation and bonus depreciation. The paper losses generated shelter current cash flow, allowing you to retain more capital for reinvestment. That additional capital generates additional returns, which compound over time.
At Carbon, we think about tax efficiency not as a way to minimize our tax bill but as a way to maximize how much capital remains in the compounding machine. Every dollar that flows to taxes is a dollar that cannot be deployed into the next acquisition, the next value-add renovation, or the next opportunity.
Conclusion: Systematic Planning Over Reactive Scrambling
Tax-advantaged strategies work best when integrated into your overall investment philosophy, not bolted on at year-end to reduce an unexpected tax bill. The most successful investors we work with treat tax planning as an ongoing discipline, evaluating every transaction through the lens of after-tax returns and structuring decisions to preserve the maximum amount of capital for compounding.
December is not the time to discover tax planning opportunities. It is the time to execute strategies you have been thinking about all year. For properties already under contract, it is the time to ensure all documentation is complete. For properties you plan to acquire or dispose of in 2025, it is the time to structure those transactions correctly from the beginning.
The recent passage of the One Big Beautiful Bill Act fundamentally changed the tax landscape for real estate investors. The permanent restoration of 100% bonus depreciation, the expansion of Section 179 limits, and the modifications to Opportunity Zone provisions create new planning opportunities that did not exist even six months ago. Investors who understand these changes and act decisively will have significant advantages over those who wait.
The U.S. tax code offers real estate investors powerful tools for building wealth. Cost segregation, 1031 exchanges, Opportunity Zones, and strategic refinancing all create paths to defer taxes, reduce liabilities, and maximize after-tax returns. None of these strategies are shortcuts. They require professional guidance, careful documentation, and disciplined execution.
The investors who benefit most from these strategies are the ones who view tax planning not as an annual chore but as an integral component of wealth creation. They work with qualified CPAs who specialize in real estate. They engage engineers for cost segregation studies. They structure transactions with tax efficiency in mind from the beginning. And they understand that every dollar preserved through intelligent tax planning is a dollar available to compound into future wealth.
If you have been delaying tax planning decisions, December represents your final opportunity to implement strategies that impact this year's return. For everything else, the planning you do now sets the foundation for the year ahead.
FAQs
1. Can I still conduct a cost segregation study on a property I bought earlier this year?
Yes. Cost segregation studies can be conducted on any property you own, regardless of when it was acquired. For maximum current-year benefit, you should complete the study and file with your tax return before the deadline. However, even if you miss the current year, you can "catch up" on missed depreciation through a Form 3115 change in accounting method. This allows you to capture all the depreciation you would have claimed in prior years as a single current-year adjustment, without the need to amend prior returns. The study must be performed by qualified professionals, typically engineers or specialized firms with Certified Cost Segregation Professional credentials and expertise in IRS cost segregation guidelines.
2. What happens if I miss my 1031 exchange deadlines?
The 1031 exchange deadlines are strict and unforgiving. You must identify replacement properties within 45 days of closing on your relinquished property and complete the purchase of at least one replacement property within 180 days or by your tax return due date, whichever is earlier. Missing either deadline disqualifies the exchange, triggering immediate capital gains tax on the sale. There are no extensions, even for reasonable cause. The IRS has consistently denied relief requests for missed deadlines, including cases involving natural disasters, medical emergencies, and COVID-19 disruptions. This is why working with experienced qualified intermediaries and having backup replacement properties identified is critical. Some investors use reverse exchanges or build-to-suit structures for more control over timing, but these strategies require planning before the initial sale.
3. How do Opportunity Zone investments compare to 1031 exchanges for tax deferral?
These strategies serve different purposes and operate under different rules. A 1031 exchange defers capital gains indefinitely as long as you continue exchanging into like-kind property. The deferral only ends when you eventually sell without exchanging or upon death when heirs receive a step-up in basis. An Opportunity Zone investment defers gains until December 31, 2026 or upon an earlier inclusion event, but offers potential elimination of tax on appreciation within the Opportunity Zone investment if held for 10 years. The 1031 exchange requires reinvesting in real estate and must meet strict like-kind and timeline requirements. Opportunity Zones accept capital gains from any source, including stocks or business sales, offering more flexibility on the source of gains. For real estate investors with existing property holdings, 1031 exchanges typically make more sense for continuing real estate exposure. For investors with unrealized gains in securities or businesses who want to diversify into real estate with long-term tax benefits, Opportunity Zones offer a compelling path.
4. Does real estate professional status apply to passive investors in syndications?
No. Real estate professional status requires both spending more than 750 hours per year in real property businesses and materially participating in those activities. Material participation typically requires regular, continuous, and substantial involvement in operations. Passive investors in syndications generally do not meet the material participation test, even if they spend considerable time evaluating deals, attending investor calls, or reviewing quarterly reports. The exception is if you are actively involved in the day-to-day operations or decision-making of the syndication itself, such as serving as a general partner or actively managing acquisitions. For most limited partners, rental real estate remains a passive activity regardless of time spent. This is why understanding passive activity loss rules and planning to generate passive income to offset passive losses becomes critical for syndication investors. The $25,000 special allowance also does not apply to limited partners who lack active participation rights in management decisions.
5. Can I combine multiple tax strategies on the same property?
Yes, and this is often where the most value is created. You can conduct a cost segregation study, claim bonus depreciation, and later execute a 1031 exchange on the same property. The accelerated depreciation from cost segregation creates recapture obligations upon sale, but those obligations transfer to the replacement property in a 1031 exchange, continuing the deferral. You can refinance to pull out equity tax-free while continuing to depreciate the property and later exchange it. You can invest 1031 proceeds into Opportunity Zone property in certain structures, though this requires careful navigation of both sets of rules. The key is ensuring each strategy is properly documented and executed according to IRS rules. Professional tax guidance is essential when layering multiple strategies, as the interactions can create unexpected complications or disqualifications. For example, taking bonus depreciation accelerates depreciation recapture, which affects the amount of gain subject to ordinary income rates versus capital gains rates upon eventual sale. The goal is not to maximize complexity but to systematically deploy the tools that make sense for your specific situation and long-term objectives while maintaining defensible documentation for each strategy.
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The strategies outlined in this piece represent the foundation of how we think about tax efficiency at Carbon. Our newsletter delivers deeper analysis on capital deployment, market intelligence, and the frameworks we use to evaluate opportunities across our portfolio.
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Sources
Internal Revenue Service, Publication 946 (2024), "How To Depreciate Property"
One Big Beautiful Bill Act of 2025, Public Law 119-4, Sections 11001-11008
Tax Cuts and Jobs Act of 2017, Public Law 115-97, Sections 13201-13206
Internal Revenue Service, Revenue Procedure 2019-38, "Safe Harbor for Rental Real Estate Enterprises"
Internal Revenue Service, Topic No. 409, "Capital Gains and Losses"
Internal Revenue Service, "Questions and Answers on the Net Investment Income Tax"
Internal Revenue Service, Form 8582 Instructions (2025), "Passive Activity Loss Limitations"
Internal Revenue Service, "Invest in a Qualified Opportunity Fund"
Internal Revenue Service, "Qualified Business Income Deduction"
IPX1031, "Delayed 1031 Exchange Timelines & Deadlines"
American Society of Cost Segregation Professionals, "2024 Cost Segregation Guidelines and Standards"
KBKG, "Cost Segregation FAQ and Best Practices"
PwC, "Enhanced and Permanent Opportunity Zones as Part of the One Big Beautiful Bill Act"
The Tax Adviser, "Avoiding Passive Loss Limitations on Rental Real Estate Losses" (July 2024)
The Tax Adviser, "The Close of Deferral: Planning for the QOZ End Game" (April 2025)
Plante Moran, "100% Bonus Depreciation Returns with the One Big Beautiful Bill"
Grant Thornton, "OBBBA Offers New Ways to Accelerate Depreciation"
BDO, "One Big Beautiful Bill Act Expands 100% Depreciation Expensing Opportunities"
Tax Foundation, "2024 Tax Brackets and Federal Income Tax Rates"
CBRE, "U.S. Real Estate Market Outlook 2025"
Green Street Advisors, "Commercial Real Estate Tax Planning Strategies, Q4 2024"
Marcus & Millichap, "Capital Markets Update: Interest Rate Impact on Real Estate Valuations, 2024"
Real Estate Roundtable, "Tax Policy & Real Estate: 2024 Year-End Planning Guide"
Carbon Real Estate Investments, Internal Investment Committee Memoranda, 2021-2024
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