Accounting for Real Estate in Boston

At Presti & Naegele, we assist Boston real estate investors in selecting the most strategic entity structure for their rental portfolios. While all investments involve some degree of risk, forming a legal entity can offer added protection and operational flexibility.

✔ A Limited Liability Company (LLC) delivers the ease of a sole proprietorship combined with the legal protections of a corporation. For clients using real estate accounting in Boston, an LLC helps shield personal assets, manage risk, and offers favorable tax options.

An LLC allows rental income to flow directly to your individual tax return, helping you avoid double taxation. You can also write off qualified expenses related to the property, such as interest on loans and necessary maintenance. In Boston’s competitive housing market, operating under an LLC can reflect professionalism and credibility. Many landlords prefer LLCs due to their liability protection, tax flexibility, and simplicity—though S Corporations may be suitable in specific scenarios for active real estate professionals seeking additional shareholder protections.

Legal Structure: How real estate owners pay taxes depends on the structure of their business.  At P&N, we can evaluate your situation and recommend the right entity for your business.

Sole Proprietorship – A sole proprietorship is the simplest form of business, where the owner and the business are one.

Limited Liability Company (LLC) – An LLC combines the liability protection of a corporation with the flexibility of a partnership.

Partnership – A partnership involves two or more individuals or entities sharing ownership and responsibilities.

S-Corporation – An S-Corporation is a pass-through entity that combines features of

corporations and partnerships.

UNDERSTANDING ACCELERATED DEPRECIATION in Boston

For Boston investors and property owners, our Real Estate CPAs provide guidance on how current tax laws impact your real estate assets. One key method we use is accelerated depreciation, which can enhance your tax efficiency while maintaining a strong property portfolio.

Depreciation helps offset the cost basis of your property over time by accounting for age, wear, and obsolescence. While residential rentals typically depreciate over 27.5 years, Boston investors can benefit from accelerated depreciation to claim larger deductions earlier, resulting in quicker tax advantages.

How Does Accelerated Depreciation Work?

A passive activity refers to any investment or business where the owner isn’t actively involved on a regular basis. When expenses exceed the income from these activities, the result is a passive activity loss (PAL).

In Boston, rental income is typically treated as passive. Common property expenses—like loan interest, insurance premiums, general maintenance, and depreciation—can all lead to passive losses. The same applies to partnerships or investment ventures in Boston where there's limited participation.

Exceptions to the passive loss rules include:

• $25,000 Allowance: If you actively manage the real estate and earn less than $100,000 during the year, you can deduct up to $25,000 in passive losses against ordinary income.



• Real Estate Professionals: Real estate professionals who materially participate in their real estate activities are not subject to the same passive loss rules. They can use real estate losses to offset income from other active sources.
  

Material participation is a key factor. If you actively manage the real estate (e.g., handle day-to-day operations), your losses may not be strictly passive. Real estate professionals who meet specific qualifications can also avoid the passive loss treatment.

When you sell an investment property in Boston and reinvest the proceeds into another qualifying property, a 1031 exchange allows you to defer capital gains tax. To qualify, funds must be handled by a designated intermediary—you cannot receive them directly. The “like-kind” designation simply means the properties must be similar in use, not identical—such as replacing a mixed-use property with raw land or trading a commercial retail space for a multi-unit building.

Boston investors can leverage the 1031 exchange multiple times to grow their portfolios without triggering immediate tax liability. Taxes only become due when a property is sold for cash. In some cases, even a previously owner-occupied home may be eligible under certain conditions.

Strategic Advisory for Real Estate Growth in Boston

Maximize your success in Boston’s real estate landscape with our expert real estate accounting services and dedicated Real Estate CPAs. We stay ahead of market shifts, identify valuable investment prospects, and offer insights that help you make smart decisions about your portfolio. Presti & Naegele is your reliable partner in Boston’s diverse and fast-paced property environment.

STREAMLINE FINANCIAL OPERATIONS WITH QUICKBOOKS EXPERTISE

Consistent, accurate bookkeeping is key to managing real estate in Boston. Our QuickBooks services are designed specifically for real estate investors and landlords, streamlining your accounting processes so you can stay focused on growth. With our support, you’ll have organized, up-to-date records for each of your Boston properties.

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