The 7-day test
If the average guest stay is 7 days or fewer, the activity may fall outside the definition of a rental activity altogether, which is what opens the door.
Landlord and High-Income Tax, NY and NJ
Most rental property tax returns we see are deducting less than they legally could.
100% bonus depreciation is back and permanent, and short-term rentals can offset W-2 income if you meet the tests. The deadline to fix a 2025 return on extension is October 15, 2026.
- October 15, 2026: the final deadline for 2025 returns on extension
- 100% bonus depreciation, permanent, for property acquired after January 19, 2025
- Enrolled to practice before the Internal Revenue Service
- Fully virtual: secure portal, all 50 states, or visit an office
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What changed
100% bonus depreciation is back for rental property, and this time it is permanent
The One Big Beautiful Bill Act restored 100% first-year bonus depreciation permanently for qualifying property acquired after January 19, 2025. Property acquired before that date still follows the old phase-down. The IRS issued implementing guidance in Notice 2026-11 in January.
For a landlord, the practical effect is that the components of a property with shorter depreciable lives, such as appliances, flooring, fixtures and land improvements, can often be written off in full in year one instead of being spread across 27.5 years. Identifying those components is what a cost segregation study does.
The honest caveat
A large first-year deduction is only worth something if you can actually use it. Passive activity loss rules decide that, and they are where most of the online advice goes quiet.
The short-term rental question
Can your short-term rental losses offset your W-2 income?
Sometimes, yes, and it is one of the few genuinely powerful strategies available to a high earner who is not a full-time real estate professional. But it depends on tests that people routinely get wrong.
Material participation
You must meet one of the IRS material participation tests, and you must be able to evidence it. Contemporaneous time logs are what make this hold up.
Real estate professional status
A separate and much harder route: more than half your working time and 750+ hours in real property trades. Rarely available to someone with a full-time job.
We will tell you honestly whether you qualify. A strategy that does not survive scrutiny is worse than no strategy, because the deduction gets reversed with interest.
Catching up
Depreciation you never claimed on a rental property is usually not lost
If nothing has been done with depreciation for years, it is usually not too late. Missed or understated depreciation can often be corrected through a change of accounting method, catching the whole amount up in the current year rather than amending years of returns.
A cost segregation study is the tool that separates out the shorter-lived components of a building so they can be depreciated faster, or written off in full where bonus depreciation applies. It is not automatically worth doing. Below a certain property value the study fee eats the benefit, and it only helps at all if you can actually use the resulting loss.
We run that arithmetic before recommending a study, and often the answer is no.
Also worth a conversation
Where high earners in NY and NJ tend to overpay
The SALT cap is now $40,400
Materially higher than it was, with a phase-out at upper incomes. For NY and NJ homeowners with real property tax bills, the year-end planning math has changed.
Working across the Hudson
New York's convenience-of-the-employer rule can tax a New Jersey resident on New York income earned at home. Getting the credit and allocation right is worth real money.
Capital gains timing
Which lots, which year, and how a property sale interacts with passive loss carryforwards: decisions best made before December, not in April.
Equity compensation
RSU vesting routinely under-withholds. Modeling the gap before year end is far cheaper than discovering it at filing.
The review itself
What we look for on last year's Schedule E
The second step of the review is a read of your prior year return. These are the things that most often turn out to be missing or misstated.
- Whether depreciation was ever set up on each property, and whether it was set up correctly
- Components with shorter depreciable lives that were rolled into the 27.5-year building basis
- Property acquired after January 19, 2025 that qualifies for 100% bonus depreciation
- Passive activity loss carryforwards you may have forgotten you are carrying
- Whether any property meets the 7-day average guest stay test
- Material participation evidence, and whether contemporaneous time logs exist to support it
- Non-resident state returns and credits where properties sit in more than one state
Before we start
What to have ready for your rental property tax review
Nothing here is mandatory for the free 15-minute call, but the more of it you can send through the portal, the more specific the answer will be.
- Last year's federal return, including Schedule E
- The depreciation schedule for each property
- Closing statements for any property acquired after January 19, 2025
- Passive activity loss carryforward figures from last year's return
- Rental income and expense records for 2025
- Average guest stay records for anything run as a short-term rental
- A list of the states your properties sit in
- Your extension confirmation, if the 2025 return is still outstanding
What happens next
How the rental property tax review works, in three steps
- 1
Free 15-minute review
Tell us how many properties you own, whether any run short-term, and whether your 2025 return is still on extension.
- 2
We look at last year's Schedule E
Depreciation schedules, passive loss carryforwards and missed component write-offs are usually visible within a few minutes. You get a written quote before any work starts.
- 3
We file, then plan for December
The 2025 return gets filed before October 15, and we come back to you before year end while there is still time to change the 2026 outcome.
The last date is October 15, 2026
That is the final deadline for a 2025 return on extension. Realistically we need your documents a couple of weeks before it to file properly, and the last two weeks are when everyone else calls too.
What it costs
What rental property and high-income tax work costs, quoted in writing first
Rental and high-income returns are priced on complexity: the number of properties, states involved and whether depreciation schedules need rebuilding. You will have a fixed fee in writing before we start work.
If you want the books and planning handled year-round rather than once a season, our monthly plans are published openly at $99, $349 and $499 per month.
On cost segregation
We advise on whether a study makes sense for your property and use the results in your return. Engineering-based studies themselves are performed by firms that specialize in them, and we will tell you when the fee would not be recovered by the benefit.
You never have to leave your home
The whole thing works online, securely, from anywhere
You do not need to be in New York or New Jersey to work with us, and we file in all 50 states, which matters when your rental properties sit in more than one of them.
A secure client portal
Upload documents through an encrypted portal built for the job. Nothing sensitive travels by email, and everything stays in one place you can log back into.
Video or phone, when it suits you
Meet your preparer by video call or phone. No travel, no waiting room, and no taking a morning off work.
Electronic signatures
Review your return and sign authorizations electronically. Nothing needs printing, scanning, or mailing.
All 50 states, and abroad
We file in every state and work with clients living outside the United States. A different time zone is not a problem; we schedule around yours.
Prefer to sit across a desk from someone?
You can. Four walk-in offices: Bronx, Jamaica Queens, Buffalo, and Totowa NJ. Virtual is the default because it is faster for most people, not because it is the only option.
Questions people actually ask
Straight answers
I have not done anything with depreciation for years. Is it too late?
Usually not. Missed or understated depreciation can often be corrected through a change of accounting method, catching the whole amount up in the current year rather than amending years of returns. That means the deduction is not automatically lost simply because it was never claimed. We would read your prior returns and depreciation schedules first to confirm the right route for your properties.What changed with bonus depreciation, and does my rental property qualify?
The One Big Beautiful Bill Act restored 100% first-year bonus depreciation permanently for qualifying property acquired after January 19, 2025, and the IRS issued implementing guidance in Notice 2026-11 in January. Property acquired before that date still follows the old phase-down. For a landlord the practical effect is that components with shorter depreciable lives, such as appliances, flooring, fixtures and land improvements, can often be written off in full in year one instead of being spread across 27.5 years.Can short-term rental losses offset my W-2 income?
Sometimes, yes, and it is one of the few genuinely powerful strategies available to a high earner who is not a full-time real estate professional. If the average guest stay is 7 days or fewer, the activity may fall outside the definition of a rental activity altogether, and you must also meet one of the IRS material participation tests and be able to evidence it with contemporaneous time logs. Real estate professional status is a separate and much harder route, requiring more than half your working time and 750+ hours in real property trades. We will tell you honestly whether you qualify, because a strategy that does not survive scrutiny is worse than no strategy.Is a cost segregation study worth it on a small rental property?
Often not. Below a certain property value the study fee eats the benefit, and a study only helps at all if you can actually use the resulting loss, which passive activity loss rules decide. We run that arithmetic before recommending one, and often the answer is no. When a study does make sense, we advise on it and use the results in your return, while the engineering-based study itself is performed by a firm that specializes in them.My 2025 return is still on extension. How late can I leave it?
October 15, 2026 is the final date for a 2025 return on extension. Realistically we need your documents a couple of weeks before that to file properly, and the last two weeks are when everyone else calls too. Getting your documents in early also leaves time to look at what the return is missing rather than simply filing it as it stands.I own rental property in more than one state. Can you handle that?
Yes, that is routine here. We file in all 50 states and handle the non-resident returns and credits that come with multi-state ownership. You do not need to be in New York or New Jersey to work with us either, because documents, questions, review and signature all happen through an encrypted portal.
Related services
Where this connects to the rest of the practice
Individual Tax Services
The full personal return behind the Schedule E, including multi-state filings, capital gains and the credits high earners in NY and NJ most often miss.
Tax Planning
Year-round planning that decides the 2026 outcome while there is still time to change it, rather than reporting it back to you in April.
RSU Tax Calculator
Model the withholding gap on vesting equity before year end, so the shortfall is not a surprise when the return is prepared.
Before October 15, find out what your rentals have been missing
A free 15-minute review of last year's Schedule E usually surfaces something. No cost, no obligation, and a written quote before any work begins.
Fees are quoted in writing before any work begins. Nothing on this page is tax advice for your specific situation; outcomes depend on facts we would need to review with you.