Accounting for Real Estate in Miami

Presti & Naegele helps Miami property owners choose the right business structure for rental investments. While rental properties carry certain risks, forming the right legal entity can offer valuable protections and flexibility.

✔ A Limited Liability Company (LLC) blends the simplicity of a sole proprietorship with the protective benefits of a corporation. It separates personal assets from business liabilities, limits personal exposure, and offers tax flexibility for those using real estate accounting in Miami.

Operating as an LLC allows rental income to flow directly to your personal tax return, avoiding corporate-level taxes. It also enables you to deduct eligible property-related expenses, such as mortgage interest and repairs. In Miami’s active property market, an LLC can convey professionalism to potential tenants and business partners. Many investors favor LLCs for their liability protection, tax flexibility, and straightforward management. S Corps may also be worth considering for certain active real estate professionals seeking added 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 Miami

For property owners and investors in Miami, our Real Estate CPAs provide guidance on how tax rules apply to your holdings. Accelerated depreciation is one strategy that can help strengthen your tax position while managing your properties.

Depreciation lets you recover a property’s cost basis over time by deducting for wear, deterioration, or outdated features. While most residential rental properties are depreciated over 27.5 years, accelerated depreciation gives Miami investors the opportunity to claim larger deductions earlier, providing greater short-term tax benefits.

How Does Accelerated Depreciation Work?

A passive activity is an investment or business where the taxpayer is not actively involved during the year. Passive activity losses (PALs) occur when expenses from these activities exceed the income they generate.

In Miami, rental properties are typically considered passive activities. Expenses such as mortgage interest, insurance, repairs, and depreciation contribute to these losses. Similarly, investments in limited partnerships or other Miami real estate ventures with minimal active participation fall into the passive category.

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 a Miami property used for business or investment and acquire another qualifying property, you can defer capital gains taxes on the sale. The proceeds must be held in escrow by a qualified intermediary and cannot be received directly. The IRS defines “like-kind” broadly, meaning properties can be different types as long as they’re similar in nature—such as exchanging a retail building for vacant land or an apartment complex for an industrial property.

A 1031 exchange can be done multiple times, allowing Miami investors to grow their portfolios tax-deferred. Taxes are due only when you eventually sell for cash, at the applicable long-term capital gains rate. While this strategy defers taxes, it doesn’t eliminate them. Under certain conditions, even a former primary residence may qualify.

Strategic Advisory for Real Estate Growth in Miami

Stay ahead in Miami’s competitive real estate market with our specialized real estate accounting services and experienced Real Estate CPAs. We monitor market shifts, identify promising investment opportunities, and provide insights to help you make informed property decisions. Presti & Naegele is your trusted partner for navigating the unique real estate environment in Miami.

STREAMLINE FINANCIAL OPERATIONS WITH QUICKBOOKS EXPERTISE

Accurate, streamlined bookkeeping is essential for real estate success in Miami. Our QuickBooks services are tailored to property owners and investors, helping simplify accounting so you can focus on acquiring, managing, and expanding your real estate holdings. With Presti & Naegele, you’ll have the financial clarity needed to grow confidently.

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