3 obscure tax loopholes to save on real estate in 2025

As a kid, Amanda Han hated real estate. As the English-speaking grandchild who would help her immigrant grandparents chase down tenants who hadn’t paid rent, “I just wanted a corporate job where I could type at a computer and get my nails done,” she recalls.

Han got her wish, working as an accountant at a Big Four accounting firm, where she met her husband, Matthew MacFarland. That’s when they noticed something striking: Nearly all of their wealthiest clients owned real estate. The reason? The US tax code is packed with perfectly legal loopholes that can save real estate investors well into the six figures—and those breaks only got bigger this year with the passage of President Trump’s One Big Beautiful Bill.

Problem is, many mom-and-pop investors have no clue that they’re missing out. To help, Han and MacFarland launched KeystoneCPA to share the “cheat code” they discovered as accountants, which also inspired the couple to start investing in real estate. Here are three loopholes investors often miss, along with one well-intentioned mistake to avoid.

The marriage loophole: If you’re married and at least one spouse earns a high W-2 or business income, certain real estate losses can offset those earnings if one spouse qualifies as a “real estate professional.” That person must spend more than 750 hours per year and more than half of their total work hours in real estate activities. They also must materially participate in their rental property. The IRS has seven “material participation” tests, which typically include managing properties, overseeing operations, and coordinating with tenants or contractors. In other words, probably stuff you’re already doing and had no idea were a tax write-off.

The Airbnb loophole: Short-term rental hosts (with average stays of seven days or fewer) can also use rental losses to offset W-2 or business income, even if they don’t qualify as a real estate professional. Similar “material participation” rules apply here, but since you don’t need to work on real estate for more hours than your day job, this strategy is ideal for side-hustle investors.

The lazy 1031 exchange: In a standard 1031 exchange, investors who’ve sold a rental can defer capital gains taxes by buying a new rental property. The “lazy” alternative is to put money into a real estate syndication that provides tax losses. If done in the same year of the gain, the syndication tax loss can curb capital gains taxes without needing to scramble to find a new property. “We see this a lot with clients who are older and don’t want to manage property anymore,” says Han.

But don’t do this: Aging parents often add their children to property titles. Han warns against it. “My mom added me to one of her rentals,” she says. “I told her to remove me.” The reason is the step-up in basis: a tax rule that resets an inherited property’s basis to its fair market value at the owner’s death. If you add kids to the title, they inherit the original (likely lower) purchase price, which can lead to a much bigger capital-gains bill when the property eventually sells.

Learn more about how real estate can help you save on taxes in 2025.