Updated October 2026. Tax and legal checks for property investors, with IRS and SEC pages read October 30, 2026. General information, not legal or tax advice.
Real estate investors face a different tax or legal question at each stage. Before you invest, check how the deal is structured. When you buy, split the price between land and building. While you own it, the IRS depreciates residential rental buildings over 27.5 years, and up to $25,000 of rental losses may offset other income, phasing out between $100,000 and $150,000 of modified AGI (IRS, read October 30, 2026).
Jump to: 🤝 Pooled deals · 🏠 Buying · 💲 Owning · ⏱️ Selling · 🪜 Your team · ❓ FAQ
Key takeaways
- A Rule 506(b) private deal can’t be advertised. It can take any number of accredited investors and up to 35 others (SEC, Investor.gov).
- Land isn’t depreciable. The IRS shows how to split your basis using the tax assessment ratio.
- The $25,000 rental loss allowance shrinks by 50% of modified AGI above $100,000 and is gone at $150,000 (IRS Pub. 925).
- The 3.8% net investment income tax applies above $200,000 (single) or $250,000 (married filing jointly) of modified AGI (IRS).
Our real estate tax playbook for investors lists the main deductions and strategies to raise with a CPA. This page is shorter and more practical. It walks the life of one investment, from the first pitch to the sale, and flags the tax or legal checkpoint at each step.
Investing with others: what should you check first?
Many people start by putting money into someone else’s deal: a syndication, a fund or a group buying an apartment building. Those offerings are usually securities, and most rely on an exemption from SEC registration.
The most common is Rule 506 of Regulation D. Per the SEC’s Investor.gov (read October 30, 2026):
- Under Rule 506(b), the company can’t advertise the deal. It may sell to any number of accredited investors and up to 35 other buyers, who must have enough know-how to judge the risks.
- Buyers who aren’t accredited must get full disclosure papers, much like a public offering, with financial statements.
- Under Rule 506(c), the deal can be advertised. But every buyer must be accredited, and the company must check it.
- Buyers get restricted securities that can’t be resold for at least six months or a year without registration.
- The company must file a Form D with the SEC after its first sale. You can look it up in the SEC’s EDGAR database.
The main disclosure document is the private placement memorandum, also called a PPM. It describes the business plan, the fees, the risks and how the sponsor gets paid. Read the fee section twice. Ask who decides when to sell, and what happens if the deal needs more cash. Investor.gov also suggests asking whether your state securities regulator received notice of the offering.
Buying a rental: which tax and legal steps come first?
Decide how you’ll hold title before you sign. An LLC, a trust, joint names or your own name each change liability, financing and paperwork. Our guide to buying a property with an LLC covers the steps. When a lawyer is worth it is covered in six investor deals that call for legal help.
Then set up your tax basis the right way. The IRS says you can’t depreciate land, so you split the purchase price between land and building. Publication 527 gives an example: if the tax assessment puts 85% of the value on the house and 15% on the land, you can use those same percentages on your purchase price. Keep the assessment notice with your closing papers.
Check local rules too. Rental licenses, short-term rental bans, inspection programs and HOA leasing caps can stop a plan cold. A quick call to the city’s zoning or code office costs nothing.
Owning a rental: what tax rules matter most?
| Rule | What it says | Source |
|---|---|---|
| Depreciation | Residential rental property is depreciated over 27.5 years under the general system | IRS Pub. 527 |
| Land | Not depreciable; split basis between land and building | IRS Pub. 527 |
| Passive losses | Up to $25,000 may offset other income if you actively participate | IRS Pub. 925 |
| Phase-out | Allowance cut by 50% of modified AGI over $100,000; generally none at $150,000 | IRS Pub. 925 |
| Net investment income tax | 3.8% on the lesser of net investment income or MAGI above $200,000 single, $250,000 joint | IRS Topic 559 |
Active participation is a lower bar than it sounds. In the IRS example, an owner who advertised the house, picked the tenant, collected rent and handled or hired repairs counted as actively participating. Hiring a property manager doesn’t automatically end it, but ask your tax pro how your setup counts.
Keep records like you’ll be audited. Save receipts, mileage, the lease, the rent ledger and repair invoices, sorted by property and year. A tax professional can explain the potential tax implications of buying and owning property for your exact situation. For the day-to-day side, see six tips to manage your real estate.
Selling: which tax and legal choices should you make early?
Plan the sale before you list. Three questions shape the tax bill:
Sell smarter
List your home on the MLS from $99
A flat fee instead of a percentage, and $0 to Beycome at closing. You stay in control of your sale.
Sell your home →Buy smarter
Get up to 2% back at closing
On homes listed by other agents, Beycome credits you up to 2% of the price at closing (1% kept, $1,499 minimum; not on FSBO homes or homes listed by Beycome sellers).
Buy a home →- Will you buy another investment property? A 1031 like-kind exchange can defer the gain. The IRS says Section 1031 now applies only to real property, and property held mainly for sale doesn’t qualify.
- How much depreciation did you take? It affects your gain when you sell, so have your tax pro run the numbers early.
- Does the net investment income tax apply? It may, above the thresholds in the table.
Our guide to how capital gains tax works on a home sale covers the main residence rules, which differ from rentals.
Then pick how to sell. A cash buyer is fast but usually pays less; compare offers from companies that buy houses for cash with what the open market might bring. Some owners sell quietly first through private MLS listing options, or sell the property privately. A Beycome flat fee MLS listing puts a rental on the major home search sites and the MLS from $99, with $0 due to Beycome at closing.
Who should be on an investor’s tax and legal team?
Usually three people: a CPA or enrolled agent who works with rentals, a real estate attorney licensed in the property’s state, and a title or closing company. Bring them in at the right moment. The CPA before you buy and again before you sell. The attorney before you sign a partnership agreement, a PPM subscription or a lease you didn’t write. The title company once you’re under contract.
Beycome works with all of them. You can sell with a flat fee listing, or with Concierge, where an expert works with you whenever you need it and every decision stays yours: $1,399. Beycome has helped 22,000+ homeowners save over $225 million, with a home sold every 30 minutes (Beycome internal data, October 2026).
Investor tax and legal questions
What tax tips should real estate investors know?
Split your purchase price between land and building, depreciate the building over 27.5 years, track every expense, check whether the $25,000 passive loss allowance applies, and plan a 1031 exchange before you sell.
What is a private placement memorandum in real estate?
It’s the disclosure document for a private real estate offering, such as a syndication. It covers the plan, fees, risks and sponsor pay. Under Rule 506(b), non-accredited buyers must get detailed disclosure.
How long do you depreciate a rental property?
The IRS sets 27.5 years for a rental home under its general method. You can’t depreciate the land.
Can rental losses offset my salary?
Up to $25,000 may, if you actively participate. The allowance shrinks by 50% of modified AGI over $100,000 and is generally gone at $150,000 (IRS Pub. 925).
Does the 3.8% net investment income tax apply to rental income?
It can. The IRS applies it to the lesser of net investment income or MAGI above $200,000 for single filers or $250,000 for married couples filing jointly.
Do I need a lawyer to invest in real estate?
Not for every deal. It’s your choice. A lawyer is worth it for partnerships, private offerings, entity setup, tenant-occupied buys and contracts you didn’t write.
General information, not legal or tax advice. Tax rules change and depend on your facts; talk to a CPA or enrolled agent and a licensed attorney before you act. IRS and Investor.gov pages read October 30, 2026.
Prices as of November 2026: Basic $99, Enhanced $399, Concierge $1,399; Basic is $129 in California and Illinois. “$0 at closing” means no Beycome fee at closing; other closing costs, taxes and title fees still apply. Beycome lists in 17 states and DC.
22,000+ homeowners, over $225 million saved and a home sold every 30 minutes: Beycome internal data, October 2026.
Sources
- SEC Investor.gov, Rule 506 of Regulation D, read October 30, 2026.
- IRS, Publication 527, Residential rental property, read October 30, 2026.
- IRS, Publication 925, Passive activity and at-risk rules, read October 30, 2026.
- IRS, Topic 559, Net investment income tax, read October 30, 2026.
- IRS, Like-kind exchanges: real estate tax tips, read October 30, 2026.
- Beycome, listing package features, October 2026.
Disclosure & Disclaimer
Beycome provides real estate services through affiliated licensed brokerages and has a commercial interest in the services and business models discussed on this blog. Content reflects Beycome’s perspective and may promote our services; it should not be treated as independent or neutral reporting.
Articles are provided for general informational and educational purposes only, not as financial, tax, legal, or investment advice or a recommendation for your particular situation. Reading this blog does not create a brokerage, advisory, or other professional relationship.
Information, opinions, pricing, service descriptions, and comparisons reflect the sources and information available when an article was published or last updated and may change. Although we aim for accuracy, we do not guarantee that all content is complete, current, or applicable to your circumstances. Laws, market conditions, and service availability vary by location. Examples and estimated savings are illustrative, depend on stated assumptions, and do not guarantee individual results.
Verify relevant information directly and consult qualified professionals before making decisions. Beycome services are subject to applicable agreements, eligibility requirements, and state-specific terms.
