Smart Real Estate Tax Strategies with Guidance from Abraham Sanieoff

Section 1: Why Real Estate Accounting is Different

Real estate accounting stands apart from other industries because of its layered complexity. Unlike a standard business, a real estate investment must consider multiple moving parts at once: property valuation, tax depreciation, income recognition, capital improvements, and sometimes even international regulations.



One of the most common mistakes investors make is assuming that a general accountant can fully optimize their tax situation. While a general accountant might understand the basics, real estate involves nuanced rules that require industry-specific expertise. For example:

• Depreciation schedules: Investors can depreciate buildings over decades, but without the right approach, they may miss accelerated methods like cost segregation.
• Passive activity loss rules: The IRS has strict guidelines for when losses can be deducted, and many investors unknowingly disqualify themselves.
• Capital gains planning: Selling property without planning can trigger unnecessary tax burdens.
• Entity structuring: Choosing the wrong structure at the beginning can lock investors into expensive mistakes.

Abraham Sanieoff often highlights this difference: while the core goal of investing is growth, taxes and compliance issues can chip away at returns if left unmanaged. He emphasizes the importance of specialists who understand not just the tax code, but also the business of real estate itself.

This is why real estate professionals benefit greatly from working with firms like Presti & Naegele. Their dedicated team focuses on the unique issues faced by property owners, developers, and investors, ensuring strategies are tailored to maximize financial outcomes.

Section 2: The Power of Strategic Entity Structuring

Entity structuring is one of the first—and most important—decisions any real estate investor will face. The way a property or portfolio is structured can significantly impact liability protection, tax exposure, and future flexibility.

Some of the most common structures include:

• Limited Liability Company (LLC): Offers liability protection while allowing pass-through taxation.
• Partnerships: Useful for joint ventures and larger projects but require careful planning to avoid disputes.
• S-Corporations and C-Corporations: Sometimes chosen for specific tax strategies, though less common in real estate.

The problem arises when investors select a structure without understanding the long-term implications. For example, holding multiple properties under a single LLC might expose the investor to greater risk, while certain partnership structures could trigger unexpected tax burdens.

Abraham Sanieoff underscores the importance of forward-thinking in this area:

“The way you structure your real estate investments today will determine how easily you can grow tomorrow.” – Abraham Sanieoff

This is where expert advisory becomes essential. Presti & Naegele guides clients through structuring choices with an eye toward both tax efficiency and growth scalability. Their team ensures that investors can take advantage of favorable tax treatments while minimizing legal and financial risks.

Section 3: Leveraging Depreciation and Cost Segregation

One of the greatest tax advantages in real estate is depreciation. Unlike most investments, real estate allows owners to deduct the cost of buildings over a set period, effectively reducing taxable income.

However, many investors fail to fully optimize depreciation. A powerful tool in this space is cost segregation, which allows investors to accelerate depreciation by breaking down a property into its individual components. For example, instead of depreciating the entire building over 27.5 or 39 years, items like fixtures, flooring, and equipment may be written off in much shorter periods.

Consider a property worth $2 million. Without cost segregation, depreciation might be spread evenly across decades. With cost segregation, an investor could front-load deductions, saving hundreds of thousands of dollars in the early years—cash that can be reinvested into new acquisitions.

Abraham Sanieoff highlights the role this plays in scaling a portfolio:

“Depreciation isn’t just an accounting concept—it’s a funding strategy for your next investment.” – Abraham Sanieoff

This is why specialized advisors like Presti & Naegele are so valuable. Their team helps investors identify opportunities for accelerated deductions and ensures that IRS requirements are met. With professional guidance, investors don’t just comply with the law—they leverage it to their advantage.

Section 4: Navigating Passive Activity Loss Rules

The IRS categorizes real estate income and losses as either “active” or “passive,” and this distinction makes a major difference when it comes to deductions. Many investors find themselves frustrated when they cannot deduct losses against other income because of passive activity rules.

However, there are important exceptions:

• Real Estate Professional Status: Investors who meet certain criteria may qualify as real estate professionals, allowing them to treat losses as active rather than passive.
• Material Participation: Active involvement in property management or decision-making can shift the classification of losses.
• Grouping Elections: In some cases, investors can group activities together to meet participation thresholds.

Abraham Sanieoff explains why attention to detail is so critical here:

“Passive activity rules catch many investors off guard, but with the right strategy, they can become an opportunity rather than a barrier.” – Abraham Sanieoff

This area of tax law is notoriously tricky, but firms like Presti & Naegele specialize in navigating it. They help investors document their participation, qualify for real estate professional status where possible, and ensure deductions are not left on the table.