Real estate & construction tax

It depends on the building's cost basis, how long you expect to hold it, and your ability to use the deduction. As a general guide, studies tend to become worthwhile above roughly $500,000 of depreciable basis, and the benefit is largest for properties with significant land improvements, specialized electrical or plumbing, or extensive finishes. It is worth remembering that this is deferral rather than permanent saving: depreciation recapture applies on sale, so a short expected hold weakens the case considerably. We model both sides before recommending a study.

Possibly, but the analysis is genuinely fact-specific. Section 1031 requires that both properties be held for productive use in a trade or business or for investment. Heavy personal use undermines that, and a property that functions more like a hotel, short stays with substantial services provided, may be treated as inventory rather than investment property. The safe harbor in Revenue Procedure 2008-16 sets out rental and personal-use tests worth reviewing well before you list the property.

It is a Section 469 test that, if met, allows rental losses to offset ordinary income instead of being suspended as passive. You must spend more than half of your personal service time in real property trades or businesses, and more than 750 hours in them during the year and, separately, materially participate in the rental activity itself, which is where a grouping election often matters. Someone with a demanding full-time job outside real estate essentially cannot qualify. Courts have repeatedly rejected time logs reconstructed after the fact, so contemporaneous records are the whole ballgame.

Contractors with average annual gross receipts under the inflation-adjusted small-contractor threshold, on contracts expected to complete within two years, may use the completed-contract method, which generally defers income. Above that threshold, percentage-of-completion is required for long-term contracts, and completed contracts may generate look-back interest. Home construction contracts have their own exception. The threshold is indexed annually, so this is worth re-testing each year rather than assuming last year's answer still holds.

Three things. Income tax nexus in every state where crews perform work, which is usually created immediately by physical presence. Payroll withholding and unemployment registration in those states for the employees who work there. And sales and use tax on materials, which frequently follows different sourcing rules from the income tax. Contractors are among the most commonly audited industries for state tax precisely because the footprint moves.