Clients often come to us with questions regarding sales tax on short-term rentals—we’re here to answer those questions for you. In brief, short-term rental units in New York are subject to the same sales tax requirements as hotels. Owners and operators who do not use a booking service must charge sales tax on sales of short-term rental unit occupancy when the rental rate exceeds $2.00 per unit per day. Booking services such as Airbnb and VRBO generally collect and remit sales tax directly on behalf of hosts. Whether you use a booking service to facilitate sales or not, you should be aware of the requirements related to sales tax for short-term rentals in New York State.

What is considered a short-term rental?

A short-term rental unit is defined as all or a portion of a building used for the lodging of guests. Short-term rental units include (but are not limited to) all or a portion of the following:

• a house
• an apartment
• a condominium
• a cooperative unit
• a cabin, cottage, or bungalow
• a similar furnished living unit

Requirements for Owners and Operators of Short-Term Rentals

Booking services and certain operators of short-term rentals located in New York are required to:

1. Register as a sales tax vendor through New York Business Express
2. File sales tax returns
3. Collect and remit the sales tax and unit fee (if applicable)

Exceptions: When You Don’t Need to Collect Sales Tax

• Operators of short-term rentals in New York State are exempt from collecting sales tax if rent out their property for three days or less in the calendar year and do not use a booking service to facilitate the sales.
• Operators are exempt from collecting sales tax if a booking service facilitates all sales of unit occupancy. In this case, the booking service must provide the operator with a Booking Service Certificate of Collection or a publicly available agreement stating that the booking service will collect sales tax and unit fees.
• An operator does not need to charge sales tax for guests who are permanent residents. A guest is considered a “permanent resident” once that guest has stayed in the rental unit for at least 90 consecutive days. Guests are required to pay state and local sales tax until that time. However, in New York City, a guest must continue to pay local sales tax until that guest has stayed in the unit for at least 180 consecutive days. Once permanent residency is established, the unit operator may credit the guest’s account or refund the tax already paid.
• Purchasers who provide an operator with a completed exemption certificate are exempt from paying sales tax on unit occupancy. Examples of guests that qualify for an exemption include certain organizations such as charitable organizations, youth sports groups, and religious groups, federal and New York State government employees traveling on official business, and authorized representatives of veterans posts or organizations.

Reach out to Our Real Estate Accounting Team for Guidance

If you own or operate a short-term rental unit in New York, it’s important that you’re aware of your obligations regarding sales tax. RBT CPAs’ real estate accounting team can help you navigate this and all other tax and accounting-related matters. Give us a call today and find out how we can be Remarkably Better Together.

Following the passage of the One Big Beautiful Bill Act (OBBBA) in July, many federal clean energy tax credits and deductions face accelerated expiration timelines or newly imposed restrictions. Below are some of the expiring clean energy incentives and expanded restrictions that could impact builders, landlords, commercial property owners, and real estate investors.

Clean Energy Incentives Set to Terminate

1. Section 25D Residential Clean Energy Credit—expires after December 31, 2025

The Residential Clean Energy Credit is a 30% credit that applies to the purchase of new, qualified clean energy property for a primary or secondary residence. Qualifying property includes solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells, and battery storage technology. To qualify for the credit, property must be fully installed and placed in service by December 31, 2025.

2. Section 25C Energy Efficient Home Improvement Credit—expires after December 31, 2025

The Energy Efficient Home Improvement Credit is a 30% credit (up to $3,200 a year) that applies to qualified energy-efficient improvements to a primary residence. Qualifying improvements include insulation and air sealing materials or systems, exterior doors, exterior windows and skylights, central air conditioners, natural gas/propane/oil water heaters, natural gas/propane/oil furnaces and hot water boilers, electric or natural gas heat pumps, electric or natural gas heat pump water heaters, biomass stoves and boilers, and home energy audits. To qualify for the credit, this property must be placed in service by December 31, 2025.

3. Section 45L New Energy Efficient Home Credit—expires for homes acquired after June 30, 2026

The New Energy-Efficient Home Credit is a tax credit of up to $5,000 per home available to eligible contractors who build or substantially reconstruct qualified new energy-efficient homes. This credit expires for homes acquired after June 30, 2026.

4. Section 179D Energy Efficient Commercial Buildings Deduction—expires for projects with construction beginning after June 30, 2026

The Energy Efficient Commercial Buildings Deduction is a tax deduction available to qualifying building owners who place in service energy-efficient commercial building property (EECBP) or energy-efficient commercial building retrofit property (EEBRP). The deduction will not apply to any property for which construction begins after June 30, 2026.

5. Section 30C Alternative Fuel Vehicle Refueling Property Credit—expires after June 30, 2026

The Alternative Fuel Vehicle Refueling Property Credit is a tax credit available to businesses and individuals who install qualified refueling or recharging property, including electric vehicle charging equipment, in a qualifying location. This credit expires for property placed in service after June 30, 2026.

Expanded FEOC Restrictions

FEOC (Foreign Entity of Concern) restrictions are regulations that limit or prohibit tax credits for entities or projects with significant ties to certain foreign nations—specifically China, Russia, North Korea, and Iran. The OBBBA extends FEOC restrictions to several additional clean energy tax credits, in an effort to reduce U.S reliance on foreign entities. Previously limited to the section 30D Clean Vehicle Credit and the section 48D Advanced Manufacturing Investment Credit, FEOC restrictions will now also apply to the following tax credits:

• 45Y Clean Electricity Production Credit
• 48E Clean Electricity Investment Credit
• 45X Advanced Manufacturing Production Credit
• 45U Zero-Emission Nuclear Power Production Credit
• 45Q Carbon Oxide Sequestration Credit
• 45Z Clean Fuel Production Credit

For most calendar-year taxpayers, the expanded restrictions will take effect beginning January 1, 2026. The new FEOC rules impact the real estate industry by limiting the eligibility of certain projects for renewable energy credits. We recommend that you check with your contractor to see if any of these restrictions apply to you.

Contact RBT CPAs for Additional Guidance

RBT CPAs’ real estate accounting team is here to help you take advantage of these clean energy tax incentives before they expire, and to navigate the new FEOC restrictions. And as always, our experts are available to support all of your other tax, accounting, audit, and advisory needs. Give us a call today and find out how we can be Remarkably Better Together.

Donating a conservation easement is a form of charitable giving that offers significant tax benefits for the donor while also preserving land for conservation purposes. Let’s talk about what a conservation easement is, the process of donating one, and the corresponding tax benefits.

What is a conservation easement?

A conservation easement is a voluntary legal agreement between a private landowner and a government agency or land trust that protects the natural resources of a property by permanently restricting future land use and/or development of the property. A conservation easement can be sold or donated, and transfers to all future landowners with the deed of the property. Conservation easements are intended to protect resources and values such as water quality, wildlife habitat, sensitive ecosystems, wetlands, riparian areas, scenic areas, working forests, and historic sites. The terms and restrictions of each conservation easement vary depending on the specific conservation objectives it is designed to meet.

What is the process of donating a conservation easement?

In general, you should follow these basic steps when donating a conservation easement:

1. Consult with the appropriate professionals, including your attorney, accountant, and tax advisor, to discuss the legal and tax implications of donating an easement.
2. Identify a qualified government agency or land trust to receive the donation.
3. Ensure that the easement meets at least one of the conservation purposes specified under Section 170(h) of the tax code.
4. Commission an appraisal of the easement from a licensed appraiser to determine its fair market value.
5. Complete a baseline study of the property, using reports, photos, maps, etc., to document the condition of the land.
6. Sign and record the easement agreement.
7. File IRS Form 8283 with your federal tax return, including a copy of the appraisal summary and signatures.
8. Report to state and local authorities if applying for state tax deductions or credits.

What are the tax benefits of donating a conservation easement?

• Federal Tax Deduction: Taxpayers who donate a conservation easement are eligible for a federal tax deduction equal to the fair market value of the easement, determined by a qualified appraisal. Most taxpayers donating qualified property can deduct up to 50% of their adjusted gross income (AGI), while qualified farmers and ranchers can deduct up to 100% of their AGI. Unused deductions may be carried forward up to 15 years.
• State and Local Tax Credits or Property Tax Relief: Many states offer their own incentives for conservation easements, including tax credits and/or property tax exemptions. For example, New York State offers a tax credit of 25% of the school district, county, and town real property taxes paid during the current tax year on the land subject to the conservation easement, capped at $5,000 each tax year.
• Federal Estate Tax Benefits: By lowering the value of a taxable estate, a conservation easement can result in reduced estate taxes. Additionally, the IRS offers an estate tax exclusion of up to 40% of the value of the land protected by a qualified conservation easement, with a maximum exclusion of $500,000.

What else should you be aware of?

• Exception to partial interest rules: While tax deductions are typically not available for donations of partial property interests (interest that consists of less than the donor’s entire interest in the property), qualified conservation contributions are an exception to this rule.
• Make sure you are donating to a qualified organization.
• Overvaluation of conservation easements is considered a form of tax abuse and can lead to severe penalties.
• Lack of a proper appraisal or baseline documentation may cause you to be ineligible for a tax deduction.

Call Us to Learn More

Considering donating a conservation easement? RBT CPAs’ real estate accounting team is here to guide you through the process and help you maximize your tax benefits. Give us a call today to find out how we can be Remarkably Better Together.

The choice of entity structure for commercial real estate brokers is an important one, as it determines factors such as the business’s taxability, liability protection, administrative complexity, and level of flexibility. In this article, we’ll highlight three entity structure options we recommend for commercial real estate brokers, along with the advantages and disadvantages of each.

The following entity types are preferable as they are all taxed at the owners’ individual rates (meaning the business itself doesn’t pay a separate federal income tax) and all have asset protection.

1. Single-Member LLC

A single-member LLC (SMLLC) is a limited liability company with a single owner. This business structure offers the liability protection of a corporation—shielding the owner’s personal assets from business debts and liabilities—while providing the tax benefits of a sole proprietorship or partnership, such as pass-through taxation and simpler tax filing. SMLLCs involve less administrative burden, as owners report the business’s taxes on their personal tax return. However, SMLLCs are subject to self-employment tax and are not eligible for the state PTET deduction.

Pros

• • Pass-through taxation—avoids double taxation from both federal and individual income tax
  • Personal assets are protected
  • Less administrative burden—taxes are reported on the owner’s personal tax return

Cons

• • Subject to 15.3% self-employment tax (equivalent to FICA tax): combined 12.4% Social Security tax (capped at $176,100 for 2025) and 2.9% Medicare tax (no cap)
  • Not eligible for state Pass-Through Entity Tax (PTET) deduction

2. S Corporation

An S corporation can have a single owner or multiple owners. Like a C corporation, an S corporation offers limited liability protection—but unlike a C corporation, an S corp is classified as a pass-through entity, preventing double taxation. Owners of S corps who are also employees are required to pay themselves a “reasonable salary,” which is subject to FICA taxes. However, the remaining profits can be distributed to the owner(s) as dividends, which are not subject to FICA taxes. By strategically dividing business income between salary and distributions, owners of S corps are able to limit their FICA exposure. S corps can also elect to participate in the state Pass-Through Entity Tax as a way of bypassing the State and Local Tax (SALT) deduction cap and reducing tax liability. However, owners of S corps may face higher administrative costs and burdens due to factors such as compliance requirements and the need to file separate corporate and individual tax returns. S corps must also adhere to more rigid rules. For example, 50/50 shareholders are required to split distributions equally to maintain S corp status. A shareholder can also only deduct losses up to the amount of their basis in the S corp (basis limitation rule).

Pros

• • Pass-through taxation—avoids double taxation from both federal and individual income tax
  • Personal assets are protected
  • Limited exposure to FICA taxes
  • Can elect to participate in PTET

Cons

• • Higher administrative costs and burden
  • Subject to more rigid rules

3. Multi-Member LLC

A multi-member LLC (MMLLC) is a business structure with more than one owner that provides the added benefit of limited liability protection. Like SMLLCs and S corps, multi-member LLCs enjoy pass-through taxation. They can elect to participate in PTET. MMLLCs offer increased flexibility regarding income and loss allocation among members (unlike S corps, in which distributions must be divided in proportion to ownership interests). MMLLCs are, however, subject to a 15.3% self-employment tax and face the additional administrative cost and burden associated with filing separate tax returns. The flexibility of MMLLCs can also present complexities such as the need for operating agreements, more complicated tax returns, and the potential for disagreements between members.

Pros

• • Pass-through taxation—avoids double taxation from both federal and individual income tax
  • Personal assets are protected
  • Flexibility in income/loss allocations
  • Can participate in PTET

Cons

• • Higher administrative costs and burden
  • Subject to 15.3% self-employment tax
  • Increased flexibility can create complexities

Reach Out for Further Guidance

For many real estate brokers, the best structure choice is an LLC, which can be taxed as any of the above structures, offering greater flexibility. As you can see, each of these entity structures comes with its own tax, legal, and administrative considerations. Our accounting and tax professionals at RBT CPAs can help you decide which entity structure works best for your tax planning needs, in coordination with your legal counsel. Reach out to our real estate accounting team for individualized tax guidance. As always, RBT CPAs is here to support all of your accounting, tax, audit, and advisory needs. Contact us today to make an appointment.

On July 4, the president signed into law the One Big Beautiful Bill Act (OBBBA), implementing many significant tax and spending policy changes. Below are some of the key provisions of the legislation impacting the real estate industry.

Permanent Extension of TCJA Tax Rates

The OBBBA makes permanent the tax rates and brackets established by the Tax Cuts and Jobs Act (TCJA) of 2017.

Increased SALT Cap

The OBBBA temporarily increases the federal deduction limit for state and local taxes (SALT cap) from $10,000 to $40,000. The limit will be adjusted each year for inflation until 2029. In 2030, the SALT cap will revert to $10,000. The deduction phases out for taxpayers with modified gross income (MAGI) greater than $500,000 in 2025, with the MAGI threshold adjusted for inflation until 2029.  For high-income earners before 2030, the SALT deduction is reduced by 30% of their MAGI over the threshold amount, but the deduction will not be reduced below $10,000. The OBBBA places no limitations on Pass-Through Entity Taxes (PTET), which are workarounds for SALT.

Bonus Depreciation

The OBBBA makes permanent 100% bonus depreciation for qualified property placed in service as of January 19, 2025.

Increased Section 179 Deduction

The OBBBA increases the Section 179 expensing limit to $2.5 million. The limit is reduced by the amount by which the cost of qualifying property exceeds $4 million (new phasedown threshold).

QBI Deduction

The OBBBA makes the 20% qualified business income deduction (Sec. 199A) permanent. The minimum deduction for active QBI is $400. To claim the deduction, applicable taxpayers must have a minimum of $1000 QBI from one or more qualified trades or businesses in which they materially participate. The phase-in threshold has been increased to $75,000 (from $50,000) for single filers and $150,000 (from $100,000) for joint filers.

Mortgage Interest Deduction

The OBBBA permanently lowers the deduction limitation for qualified residence interest to the first $750,000 in home mortgage acquisition debt.

Limitation on Business Interest

The OBBBA reinstates the EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) limitation under Sec. 163(j), effective for tax years beginning after December 31, 2024. Adjusted taxable income (ATI) will be computed without regard to the deduction for depreciation, amortization, or depletion.

Expansion of Low-Income Housing Tax Credit (LIHTC)

The OBBBA permanently increases allocations for 9% LIHTC by 12%, and also permanently reduces the private activity bond financing requirement for 4% LIHTC from 50% to 25%. These changes will become effective January 1, 2026.

Qualified Opportunity Zones

The OBBBA makes the Opportunity Zones tax incentive permanent, with several modifications including a narrower definition of “low-income community” and expanded reporting requirements. Every ten years, state governors will propose new opportunity zones. The OBBBA also includes additional incentives for rural opportunity zones. This provision becomes effective January 1, 2027.

Percentage-of-Completion Method

The OBBBA expands the exception to the percentage-of-completion method requirement to certain residential construction contracts.

New Markets Tax Credit (NMTC)

The OBBBA makes the Sec. 45D New Markets Tax Credit permanent.

Removal of Clean Energy Incentives

The OBBBA terminates or phases out many clean energy tax incentives, including Section 179D (energy-efficient commercial buildings deduction), Section 45L (new energy-efficient home credit), Section 48E (clean electricity investment credit), and Section 45Y (clean electricity production tax credit).

Additional Guidance

The above provisions represent just some of the recent tax and policy changes that may impact you and your business. To learn about additional relevant provisions—and for insights and guidance on how these changes could affect you—please don’t hesitate to reach out to our real estate accounting professionals at RBT CPAs. Our team is here to support all of your tax, audit, accounting, and advisory needs. Give us a call today to find out how we can be Remarkably Better Together.

Are you planning to sell your home? You may be able to exclude a portion of the profit of the home sale from your taxable income through the Section 121 exclusion. Let’s explore some of the details of this tax-saving tool and how you can qualify.

How are capital gains calculated?

Capital gains are equal to the profit you make when you sell your home.

In other words…

Capital Gains = Sale Price – (Purchase Price + Capital Improvements + Costs to Purchase/Sell the Home)

Capital gains on the sale of a home are subject to capital gains taxes, as they are considered a form of income. Short-term capital gains (capital gains from the sale of assets held for one year or less) are taxed as ordinary income. Long-term capital gains (capital gains from the sale of assets held for longer than a year) are taxed at three different rates (0%, 15%, or 20%), depending on income and filing status.

What is the Section 121 exclusion?

The Section 121 exclusion allows you to exclude from your taxable income up to $250,000 of capital gains (profit) from the sale of your home. Married couples filing jointly can exclude up to $500,000. This exclusion applies to a range of properties including single-family homes, condos, cooperative apartments, mobile homes, and houseboats. However, you must meet certain conditions to qualify for this tax benefit. It is important to note that most states follow the exclusion, but the rules may vary from state to state.

How can you qualify?

To qualify for the Section 121 exclusion, you must meet an ownership test as well as a use test. You must have owned and used the property as your primary residence for at least two of the five years preceding the sale of the home. The two years do not have to be consecutive, but the total time you have lived in the home must add up to at least two years (24 months). In the case of married couples, only one spouse must meet the ownership requirement, but both spouses must meet the residence (use) requirement individually in order to qualify. If you own and live in more than one home, you must use a “facts and circumstances” test to determine which property qualifies as your main home. A person can only own one “main home” at a time.

What makes you ineligible?

You are not eligible for the Section 121 exclusion if you acquired the property through a like-kind exchange (1031 exchange) within the last five years or if you are subject to expatriate tax. In addition, if you sold another home within the two-year period preceding the home sale and claimed the Section 121 exclusion on that sale, you cannot qualify for the exclusion again. Individuals may only take the exclusion once within a two-year period. There are some exceptions to the eligibility test based on circumstances such as separation or divorce during home ownership, death of a spouse, or status as a service member. A full list of exceptions to the eligibility test can be found here.

Do you qualify for a partial exclusion?

Though you may not qualify for a maximum exclusion based on the eligibility requirements, you may still qualify for a partial exclusion. You may qualify for a partial exclusion if your reason for moving is due to a change in workplace location, health-related events, or unforeseeable events (i.e., your home was destroyed or condemned, death of a homeowner, divorce, etc.).

Looking for more information or guidance?

For additional information on the Section 121 tax exclusion, including worksheets for calculations, visit IRS Publication 523 (2024), Selling Your Home. For guidance on how you can make the most of capital gains exclusions and other tax-saving opportunities in the real estate market, you can rely on our experts at RBT CPAs. Our experienced professionals are here to support all of your tax, audit, accounting, and advisory needs. Give us a call today to find out how we can be Remarkably Better Together.

Do you own and manage real estate properties as your primary occupation? If so, you may qualify for real estate professional status (REPS). Real estate professional status is a tax designation with the potential to reduce the tax liability of real estate professionals significantly. To qualify for and maintain real estate professional status, individuals must meet specific requirements set forth by the IRS. So, what are the benefits of REPS, and do you qualify for this designation? Let’s break it down.

What are the tax benefits of real estate professional status?

Individuals with REP status are exempt from passive activity loss rules typically applied to rental properties. Passive activity loss rules dictate that passive losses cannot be used to reduce an individual’s earned (ordinary) income for tax purposes. Under this regulation, losses incurred from passive activities can only be used to offset passive income, not active income. Rental activities are normally subject to passive activity loss rules because they are considered “passive activities” by the IRS, even if the owner is substantially involved in the operation of the property. However, the IRS makes an exception for individuals with real estate professional status. Rental activities are not considered passive for real estate professionals who materially participate in real estate activities. This means that individuals with REP status can use losses incurred from rental activities to reduce their overall taxable income.

How do you qualify for real estate professional status?

The IRS defines a real property trade or business as the following: a trade or business that develops (or redevelops), constructs (or reconstructs), acquires, converts, rents, leases, operates, manages, or brokers real property. To qualify for REPS, you must:

1. Spend more than 50 percent of your time materially participating in real property trades or businesses.
2. Perform more than 750 hours of service in real property trades or businesses in which you materially participate.

Please note, there are also other requirements that are looked at by tax courts. There have been recent cases challenging taxpayers’ qualifications for real estate professional status; as such, it is crucial to carefully review and document your real estate professional qualifications.

The most important component of REPS qualifications is the issue of material participation. But what does it mean to materially participate? Material participation requires active involvement in the operation of the activities. To qualify for REPS, an individual must meet at least one of the specific material participation requirements outlined by the IRS. Speak with your financial advisor to determine if you meet any of these requirements. Some examples of material participation include: showing property to potential renters, processing tenant applications, performing maintenance and repairs of the property, supervising a property manager, purchasing supplies, and communicating with renters. Activities such as research, education, and investor activities typically do not count as material participation.

To qualify for and maintain REP status, real estate professionals must maintain contemporaneous records of work hours and activities. The chances of being audited by the IRS increase when you attain REP status, and you will be responsible for providing evidence of qualification. If audited, you must be able to prove material participation using evidence such as time logs, work calendars, appointment books, emails, records of meetings, or receipts.

What’s next?

Real estate professional status can offer significant benefits to people who own and operate rental properties. If you are interested in applying for this tax designation, it’s important to speak with a tax professional who can help you review the qualifications and get the most out of potential tax benefits. RBT CPAs is here to assist you. Our experts can help you minimize your tax liabilities and maximize deductions with our strategic tax planning tailored to the unique complexities of the real estate industry. And as always, we are here to support all of your other accounting, tax, audit, and advisory needs. Give us a call today to learn more.