Rental Property Tax Preparation
in Arlington & Williamsburg, VA
- Schedule E, Depreciation,
& Every Deduction You’re Owed.
Depreciation schedules. Passive activity loss limitations. The real estate professional election. Short-term rental rules. The interaction between rental income and your overall tax picture.
Each of these requires specific knowledge. Each one, handled imprecisely, costs you money.
At Griffin & Johnson, we work with rental property owners from first-time landlords with a single unit to investors managing multi-property portfolios. We handle the full Schedule E, maintain accurate depreciation schedules, identify every deduction available, and advise on every property decision - refinancing, improvements, sale, and 1031 exchanges - before you commit.
Depreciation alone can shelter thousands of dollars of rental income from taxation every year.
But it only works if it's calculated correctly from the start - with the right basis, the right recovery period, and the right method. A miscalculated depreciation schedule doesn't just cost you this year. It compounds, and it creates a recapture problem when you sell.
period · Residential
The Mistakes That Show Up
on Every Rental Return
Filed Without Expertise
Rental property taxation has layers that general tax software doesn't surface and general preparers don't examine. The rules around passive activity losses, depreciation methods, short-term rental classification, and property sales interact with each other in ways that produce significant under-deductions - and in some cases, significant IRS exposure - on returns that look correct on the surface.
Depreciation was never started - or started wrong
Residential rental property depreciates over 27.5 years. The calculation requires correct basis, correct land allocation, and the right start date. When it's set up incorrectly - or never set up at all - years of legitimate deductions disappear. And when you sell, the IRS recaptures depreciation whether you took it or not.
Passive activity losses are sitting unused in a carryforward
Most rental losses are "passive" - they can only offset passive income, not wages. But the $25,000 allowance for active participants (phased out between $100K–$150K AGI) and the real estate professional election can unlock those losses entirely. Most landlords never know this option exists.
Repairs and improvements were classified the same way
A repair - fixing a broken window, repainting - is deductible in the year paid. An improvement - replacing the roof, adding a bathroom - must be capitalized and depreciated. Getting this wrong either costs current-year deductions or creates an audit issue. The distinction is specific and it matters.
Personal use allocation was handled incorrectly - or ignored
If you use your rental property personally for any part of the year, the IRS requires an allocation of expenses between rental and personal use. The formula depends on days rented versus total days used. Get it wrong and you either over-deduct or under-deduct - both create problems.
The Airbnb return was filed as long-term rental income
Short-term rentals - where the average stay is 7 days or fewer - are not treated as passive rental income. They may be treated as Schedule C self-employment income, which changes the deduction rules, the self-employment tax exposure, and the passive activity analysis entirely. Most short-term rental operators don't know this until they're audited.
The 1031 exchange window closed while the client was still deciding
A 1031 like-kind exchange defers capital gains tax and depreciation recapture on a rental property sale - but it requires identifying the replacement property within 45 days and closing within 180. Miss either deadline and the entire gain becomes taxable. This requires planning before the sale, not after it.
Every problem above is recoverable - some through amendment, some through better documentation going forward, some through proactive planning before a sale or exchange. At Griffin & Johnson, we review your property’s full tax history when we take on a new rental client - not just the current year. If a depreciation schedule was wrong, we fix it. If passive losses are sitting unused, we analyze how to unlock them. If a property sale is on the horizon, we start the 1031 conversation before the listing goes up.
The Deduction That
Works While You Sleep -
If It's Set Up Correctly
Depreciation is the IRS's acknowledgment that a rental property physically wears out over time. You get to deduct a portion of the property's value every year - even if the property is appreciating. It's a non-cash deduction that shelters real rental income from real taxation. But it requires the right setup from day one.
The IRS allows you to deduct 1/27.5th of the property's depreciable basis each year. The basis is the purchase price plus improvements, minus the land value - which must be allocated separately.
Certain components of a rental property - appliances, carpeting, landscaping improvements - qualify for shorter recovery periods. A cost segregation study identifies and accelerates these deductions into earlier years.
Under current law, qualifying short-life components identified in a cost segregation can be fully deducted in the year placed in service. This is a powerful first-year deduction for new acquisitions and improvements.
When you sell a rental property, the IRS recaptures all depreciation taken - at a 25% rate, not the standard capital gains rate. And critically, it recaptures depreciation you should have taken whether you took it or not. A 1031 exchange defers this. A sale triggers it.
Airbnb and VRBO Income
Plays by Different Rules
Than You Think
How your rental is classified for tax purposes depends entirely on average rental duration - and the classification changes everything about how deductions work, how losses are treated, and whether self-employment tax applies.
Most people assume that rental income is rental income - Schedule E, passive activity, simple deductions. That assumption is incorrect for short-term rentals. The IRS has specific rules based on average rental periods, and crossing the wrong threshold means your "rental" property is actually being treated as a business - with self-employment tax consequences that most short-term operators never anticipated.
The personal use calculation matters too. If you use the property yourself for more than 14 days - or 10% of rental days, whichever is greater - the IRS limits your deductible losses. The mixed-use allocation is specific, documented, and auditable. It requires tracking both rental days and personal days accurately throughout the year.
We handle short-term rental returns correctly from the classification analysis through the expense allocation - and we advise clients on how their usage patterns affect their tax position before the year closes, not after.
Treated as a hotel-type business. Not passive rental income. May be subject to self-employment tax depending on services provided. Schedule C may apply instead of Schedule E.
Still potentially not passive rental income if significant personal services are provided with the rental. Classification requires analysis of actual services and rental pattern.
Treated as passive rental income under standard Schedule E rules. Subject to passive activity loss limitations unless the real estate professional election or $25K allowance applies.
The classification determines the tax treatment - and it's determined by the average of all rentals, not any single rental. Keep a rental log with dates, durations, and personal use days. We'll apply the correct rules at filing.
One Rental Unit or
a Full Portfolio -
We Handle Both Correctly
Rental property taxation applies differently at different scales and structures. Whether you just acquired your first property or you're managing a portfolio across multiple states, the rules are specific - and the cost of imprecision scales with the size of the investment.
First-time landlords with a single unit
A first rental property is when the depreciation schedule gets started - correctly or incorrectly. Rental Property Tax Preparation from year one means the basis, land allocation, and method are set up right - preventing problems that compound over the life of ownership.
Multi-unit and portfolio property owners
Multiple properties mean multiple depreciation schedules, multiple expense tracking streams, and passive activity analysis across all properties combined. Our Rental Property Tax Preparation covers every property in one organized engagement - no gaps between properties.
Short-term rental operators - Airbnb, VRBO
Classification analysis, personal use allocation, self-employment tax exposure, and the correct schedule - we handle short-term rental returns with the specificity they require.
Investors with out-of-state rental properties
Out-of-state rental income creates a non-resident filing obligation in the property's state. Rental Property Tax Preparation for multi-state owners includes every required state return, the credit for taxes paid, and double-taxation prevention.
Real estate professionals seeking the professional election
The real estate professional election unlocks passive rental losses against ordinary income - but it requires meeting specific hour thresholds and documenting material participation. We analyze qualification and document it correctly.
Property owners planning a sale or 1031 exchange
The tax on a rental property sale - capital gains plus depreciation recapture - can be substantial. We calculate the full tax impact before you list and advise on 1031 exchange qualification when the timeline allows for proper planning.
Every Piece of Your
Rental Return, Handled
Completely
Rental Property Tax Preparation isn't one form - it's a set of interconnected schedules, depreciation records, passive activity analyses, and state returns that all affect each other. We prepare the complete picture, with one preparer who maintains your records year over year.
Straight Answers to the
Questions
You're Already Asking
No jargon. No runaround. What you actually need to know before you decide.
Start Your Intake.
Every Deduction. Every Schedule. Done Right.
Accurate depreciation. Passive activity analysis. Every state filing obligation. Submit your intake form and we'll reach out within one business day with a rental-specific document checklist. We handle the full picture - from your first rental unit to your full portfolio.