Reference
Glossary
One sentence per term. If a topic page loses you, start here. Tick a term once you can explain it in your own words.
Terms you know0 / 20
- Active participation
- A lower involvement standard — mainly making management decisions — that can unlock up to $25,000 of rental loss.
- Augusta Rule
- A rule allowing up to 14 days of home rental income to go unreported.
- Basis
- What the property counts as costing you for tax purposes; it rises with improvements and falls with depreciation.
- Bonus depreciation
- An immediate first-year deduction for qualifying short-life property.
- Boot
- Cash or non-like-kind value received in an exchange — it is taxable.
- Capital gain
- The profit when a property sells for more than its adjusted basis.
- Cost segregation
- An engineering study that reclassifies building components into shorter depreciation lives.
- Depreciation
- The yearly deduction that recovers the cost of a building over its useful life.
- Depreciation recapture
- Tax owed on previously claimed depreciation when the property is sold, generally up to 25%.
- Fair market rent
- The rate an unrelated party would pay, needed to support a home rental deduction.
- Installment sale
- A sale collected over multiple years, spreading the gain across those years.
- Like-kind exchange
- A Section 1031 swap of investment real estate that defers gain.
- Material participation
- A set of IRS tests measuring whether you are genuinely involved in an activity.
- Passive activity
- A business or rental you do not materially participate in; its losses are limited.
- QBI deduction
- A potential 20% deduction on qualified business income, including some rental enterprises.
- Qualified intermediary
- The neutral party that must hold proceeds during a 1031 exchange.
- REPS
- Real Estate Professional Status — meeting the more-than-half and 750-hour tests.
- Schedule E
- The tax form where rental income and expenses are reported.
- Step-up in basis
- The reset of basis to fair market value when property passes at death.
- Suspended loss
- A passive loss carried forward because it could not be deducted this year.