{ “@context”: “https://schema.org”, “@type”: “FAQPage”, “mainEntity”: [ { “@type”: “Question”, “name”: “Should I use an S-Corp for my real estate investing business?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “S-Corps make sense for active real estate income — not passive rental income. If you run a property management company, do fix-and-flips, or earn real estate commissions, an S-Corp can save significant self-employment tax by splitting income between salary and distributions. But for buy-and-hold rental properties, an S-Corp creates more problems than it solves: no 1031 exchanges, no stepped-up basis at death, and complex accounting requirements. KDA’s Phoenix team will structure your business correctly — S-Corp for active income, LLC/individual for passive rentals.” } }, { “@type”: “Question”, “name”: “What should Arizona real estate investors know about the One Big Beautiful Bill Act?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The One Big Beautiful Bill Act’s permanent restoration of 100% bonus depreciation is transformative for Phoenix real estate investors. Combined with a cost segregation study, you can now write off 20–40% of a commercial property’s purchase price in year one — permanently, not just through 2025. For a Phoenix investor buying a $1M commercial property, this means $200,000–$400,000 in first-year deductions. Arizona’s 2.5% flat tax means the state-level benefit is modest, but the federal savings at 37% are enormous. KDA’s team will model the OBBBA impact for your specific acquisition.” } }, { “@type”: “Question”, “name”: “Can I do a 1031 exchange on a short-term rental property?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Yes — STRs are eligible for 1031 exchanges when held for investment purposes and meeting the IRS safe harbor criteria. The key risks are excessive personal use (vacation home rules) and holding periods that are too short. KDA’s Phoenix real estate CPA team reviews your STR records before any sale to confirm 1031 eligibility and advise on any corrective steps needed. We’ve successfully structured 1031 exchanges for Airbnb and VRBO properties throughout Phoenix and the surrounding area.” } }, { “@type”: “Question”, “name”: “What is the difference between active, passive, and portfolio income for real estate investors?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The IRS classifies income into three categories, each with different tax treatment: (1) Active (earned) income — wages, self-employment income, real estate dealer income; subject to income tax AND self-employment/FICA tax. (2) Passive income — rental income, limited partnership income; subject to income tax but NOT self-employment tax; losses can only offset passive income. (3) Portfolio income — dividends, interest, capital gains; subject to income tax and potentially NIIT; not subject to SE tax. For Phoenix real estate investors, the goal is to maximize passive income (no SE tax) while unlocking passive losses through REPS or the STR loophole.” } }, { “@type”: “Question”, “name”: “Do I need a specialized real estate CPA or will any CPA do?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “If you own one rental property and your tax situation is straightforward, a general CPA can handle the basics. But the moment you have multiple properties, a short-term rental, a fix-and-flip, or a portfolio worth $500K+, you need a specialist. The tax strategies available to real estate investors — cost segregation, bonus depreciation, REPS election, STR loophole, 1031 exchanges — require deep expertise to execute correctly and defend in an audit. KDA’s Phoenix team focuses exclusively on these strategies.” } }, { “@type”: “Question”, “name”: “How does the $25,000 passive loss allowance work for rental property owners?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The $25,000 passive loss allowance allows rental property owners who ‘actively participate’ in their rentals to deduct up to $25,000 in rental losses against non-passive income — even without REPS qualification. Active participation is a low bar: you just need to make management decisions (approve tenants, set rents, authorize repairs). However, this allowance phases out between $100,000 and $150,000 of AGI — completely eliminated at $150,000. For Phoenix investors with AGI above $150,000, the STR loophole or REPS is needed to unlock rental losses.” } }, { “@type”: “Question”, “name”: “What is a ground lease and how is it taxed?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “For Phoenix investors with highly appreciated land, a ground lease is a powerful alternative to selling. Instead of triggering capital gains on the land sale, you lease the land for 50–100 years, receiving annual rent payments taxed as ordinary income. The land remains in your estate and passes to heirs with a stepped-up basis. The tenant builds and depreciates improvements on your land. KDA’s Phoenix real estate CPA team will model the after-tax comparison between selling the land outright and entering a ground lease arrangement.” } }, { “@type”: “Question”, “name”: “What credentials should I look for in a real estate CPA?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Credentials matter, but specialization matters more. A CPA who does real estate taxes for 5% of their clients is less valuable than one for whom it’s 100% of their practice. Ask directly: ‘What percentage of your clients are real estate investors?’ At KDA, the answer is 100%. Our Phoenix team lives and breathes real estate tax law — it’s all we do.” } }, { “@type”: “Question”, “name”: “How does the Arizona flat tax affect my real estate investment returns compared to California?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “For investors considering Phoenix vs. California markets, the tax math strongly favors Arizona. Beyond the income tax rate difference, Arizona has no estate tax (saving potentially hundreds of thousands on a large portfolio), no Prop 19 complications for estate transfers, and a simpler regulatory environment. The after-tax return advantage of Arizona over California for a typical real estate investor is 8–12% per year on state taxes alone. KDA’s Phoenix real estate CPA team will provide a detailed state-by-state comparison for your investment decision.” } }, { “@type”: “Question”, “name”: “What is the fix-and-flip tax treatment and how is it different from buy-and-hold?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The tax treatment of fix-and-flip vs. buy-and-hold is dramatically different. Buy-and-hold: capital gains rates, depreciation deductions, 1031 exchange eligibility, stepped-up basis at death. Fix-and-flip: ordinary income rates, no depreciation, no 1031, self-employment tax. For Phoenix investors doing both, it’s critical to keep the activities legally separate — mixing dealer and investor activities can taint your buy-and-hold properties with dealer status. KDA’s real estate CPA team structures flipping and investing activities in separate entities to protect each strategy.” } } ] }