lutz logo
lutz logo
  • Services
  • News & Insights
  • About
  • Client Portal
Search
  • Services
  • Accounting
  • Advisory
  • Financial
  • M&A
  • Talent
  • Tech
  • Accounting Services
Services
  • Audit & Assurance
  • Client Advisory Services
  • Outsourced Accounting
  • Tax
  • Business Valuation
  • Litigation Support & Forensic
View All
Industries
  • Agribusiness
  • Construction
  • Family Office
  • Healthcare
  • Manufacturing & Distribution
  • Nonprofit
View All
News & Insights
Financial Access Checklist
Guide
Financial Access Checklist

Share this information with your spouse to assure you each have access to manage important financial tasks independently.

Read More
  • Advisory Services
Services
  • Accounting
  • Financial
  • M&A
  • Talent
  • Tech
View All
Resources
The Art of Budgeting
Recording
The Art of Budgeting + Smart Saving Strategies
Learn how to get your finances under control and increase your savings! Hear real-life examples and best practices to secure a successful future.
Watch Now
Business Insights
Comparing Business Valuation Methods
Blog
Comparing Business Valuation Methods: Which is Right for You?
Valuation experts rely on three primary approaches to determine the value of a business: income approach, asset approach, and market approach.
Read More
  • Financial Services
Services
  • Financial Planning
  • Investment Advisory
  • Retirement Plan Services
  • Pooled Employer 401(k) Plan
View All
Resources
  • Lutz Financial Blog
  • Our Team
  • Client Portal
  • Charles Schwab Login
  • Send Files Securely
Contact Us
NEWS & INSIGHTS
Website Featured Content Images
Market Commentary
Financial Market Updates

Read our latest financial market updates and sign up to receive them straight to your inbox.

Read More
  • M&A Services
Services
  • Sell-Side Representation
  • Transaction Advisory
  • Exit Planning
  • Business Valuation
View All
Resources
Selling a C Corporation
Blog
Factors to Consider When Selling a C Corporation

Understand the tax issues affecting both buyers and sellers involved in C corporation merger and acquisition transactions

Read More
Business Insights
Post-Acquisition Checklist
Guide
Post-Acquisition Checklist for a Seamless Transition
To help you navigate this critical period, we've compiled a comprehensive checklist covering key areas that demand attention after the deal closes. 
Read More
  • Talent Services
Services
  • Search & Staffing
  • Outsourced HR
  • HR Consulting
View All
Candidate Resources
  • Job Seeker Process
  • Current Opportunities
  • Lutz Internships
Contact Us
News & Insights
Overcoming Bias in Recruitment
Blog
Unconscious Bias in Recruitment: How to Overcome It
Learn how to take the bias out of recruitment and build a diverse, talented workforce with these tips.
Read More
  • Tech Services
Services
  • Outsourced IT
  • Data Analytics
  • Technology Strategy
  • Software Consulting
View All
Resources
When to outsource your IT
Blog
How to Know When It's Time to Partner with an IT Pro

One day your technology seems manageable, and the next you're wondering if you need more support. Here are the clear signs it's time to outsource your IT.

Read More
Business Insights
Untitled design (1)-Mar-08-2024-08-50-35-9527-PM
Video
Pella Client Testimonial
"I've used them for valuation work, stock transfers, hosting all of my technology, and now data analytics. I'd say they lead the pack in terms of anticipating what I'm going to need before I even know I need it."
View Now
Business Insights
BLOG
Explore Topics

Get the latest news and insights on relevant topics that matter most to you.

View All
Webinars & Events
Events
Register Today

Register for an upcoming event or access our library of on-demand recordings.

View All
Market Updates
COMMENTARY
Stay Informed

Catch up on market moves with our weekly update, featuring in-depth insights and analysis.

View All
Resources
EBOOKS & GUIDES
Download Now

Take a deep dive into challenging business topics with these free educational resources. 

View All
  • News & Insights
  • Business Insights
  • Webinars & Events
  • Market Updates
  • Resources
Business Insights
BLOG
Explore Topics

Get the latest news and insights on relevant topics that matter most to you.

View All
  • About
About

Lutz is a business solutions firm for people seeking a partner to help energize and heighten economic and organizational success.

Our Company
Our Team
Offices
Careers
Internships
Contact Us
  • Contact
Client Portal

Log in to your relevant client portal to access your account, upload documents, or make a payment.

Make a Payment
Accounting Client Portal
Financial Client Portal
Charles Schwab Login
Send Files Securely
Contact Us
  • Construction

Multi-Family Housing Tax Methods

Tom Docter, Tax Manager
January 6, 2025
Multi-Family Housing Tax Methods

Multi-family housing investments offer significant potential for steady cash flow and long-term appreciation. However, maximizing profitability isn’t just about acquiring the right properties, it’s also about strategically navigating the complex landscape of tax implications. This guide explores key tax strategies that can substantially impact your bottom line. 

Key Tax Deductions 

Understanding and leveraging tax deductions is crucial for multi-family property owners. These deductions can significantly reduce your taxable income, improving your overall return on investment. Here are some of the most important deductions to consider: 

1. Depreciation: The Power of Non-Cash Deductions

Depreciation is a cornerstone of tax advantages in real estate investing. For multi-family properties, the Modified Accelerated Cost Recovery System (MACRS) allows for depreciation over 27.5 years. Think of it as a silent partner that works to lower your taxable income without impacting your cash flow—a rare win-win in the financial world. 

2. Interest Deductions

Interest paid on mortgages and improvement loans for your multi-family properties is generally tax-deductible. This includes interest on purchase mortgages, refinancing loans, and home equity loans used for property improvements. 

3. Property Taxes & Insurance

Local property taxes and insurance costs are typically fully deductible as operating expenses. These hefty expenses can quickly add up, so this deduction is particularly beneficial for owners of larger complexes.

4. Repairs, Maintenance, and Management Costs

Routine expenses for managing and maintaining your property—like repairing a leaking roof or repainting common areas—are tax-deductible. Even property management fees and advertising costs for vacant units are eligible, making this a valuable deduction to track carefully. 

 

Tax Credits & Incentives 

In addition to deductions, various tax credits and incentives can provide substantial benefits to multi-family property owners. These programs are designed to encourage specific types of investments or behaviors. Here are some key credits and incentives to explore: 

1. Low-Income Housing Tax Credit (LIHTC) 

The LIHTC program offers a dollar-for-dollar reduction in federal tax liability for investors in qualified low-income housing projects. For instance, if you’re developing a property in an underserved area, this credit can significantly offset your initial costs. 

2. Opportunity Zones and Capital Gains Deferral 

Investing in Qualified Opportunity Zones offers a double win: you can defer capital gains taxes by reinvesting into Opportunity Funds and potentially eliminate taxes on future gains if held for over 10 years. This is a powerful incentive for those eyeing long-term growth. 

3. Energy-Efficiency Credits 

Upgrading your property’s energy systems doesn’t just reduce utility bills—it can also earn you tax incentives. For example, installing solar panels or geothermal systems may qualify for the Business Energy Investment Tax Credit (ITC), further enhancing your ROI.  

 

Cost Segregation 

Cost segregation is a strategic tax planning tool that allows owners of multi-family properties to accelerate depreciation deductions. For example, reclassifying assets like carpeting or landscaping into shorter recovery periods can reduce current tax obligations and boost cash flow. 

 

Passive Activity & Loss Limitations 

Multi-family housing investments often involve passive income, which comes with its own set of tax rules. Passive activity loss (PAL) limitations can prevent you from using losses from rental activities to offset non-passive income, such as wages. However, exceptions exist. For instance, if you actively participate in managing your property or qualify as a real estate professional, you may bypass some of these restrictions. Understanding how these limitations work is key to making the most of your tax strategy. 

 

Capital Gains Considerations 

Selling a multi-family property can unlock significant equity, but it also triggers capital gains taxes. Timing is everything here. Gains from properties held for over a year are taxed at the long-term capital gains rate, which is generally lower than short-term rates. On the flip side, depreciation recapture, where previously deducted depreciation is taxed as income, can reduce your net profit. Planning for this ahead of time, perhaps through strategies like a 1031 exchange, can help soften the blow and keep your investments working for you. 

 

Section 1031 Exchanges 

Section 1031 of the Internal Revenue Code allows investors to defer capital gains taxes by exchanging one investment property for another of a similar kind. This provides the ability to diversify or consolidate your real estate portfolio and upgrade to properties with better return potential without incurring immediate tax liability. 

 

Partner with Lutz’s Real Estate Tax Experts 

Successfully navigating multi-family housing tax strategies requires experienced guidance and industry knowledge. At Lutz, our experienced tax team has helped numerous property owners implement effective tax strategies. We understand the unique challenges and opportunities in today’s real estate environment and can help design approaches that align with your investment objectives. Contact us to explore how our expertise can help optimize your multi-family housing tax strategy. 

Docter, Tom_Color Large-1
  • Analytical, Consistency, Developer, Harmony, Relator

Tom Docter

Tax Manager

Tom Docter, Tax Manager, began his career in 2017. He has progressed from an intern to his current position, acquiring in-depth taxation experience.

Focusing on tax compliance and consulting for businesses and their owners, Tom works across various industries, including agribusiness, construction, real estate, and personal trusts. Tom's analytical approach, combined with his desire to develop strong relationships, allows him to provide tailored solutions and strategic cash flow planning. He particularly enjoys seeing how his advice contributes to the growth of businesses and, by extension, helps shape the landscape of the communities they serve.

 

Tom lives in Lincoln, NE. Outside the office, he can be found watching Husker basketball and football games, golfing with friends and coworkers, and playing card games like Pitch.

531.500.2012

tdocter@lutz.us

Connect on LinkedIn

Recent News & Insights

Manufacturing
Tax Considerations for Remodeling or Expanding a Manufacturing Facility
Planning to modernize or expand your manufacturing facility? The tax implications could have a ...
Read More
Market Commentary
Time in the Market + 5.28.25
For anyone interested in following the markets, there has never been a better environment than ...
Read More
Accounting
Tax Highlights of the Proposed “The One, Big, Beautiful Bill”
On May 22, 2025, the U.S. House of Representatives passed a sweeping 1,116-page bill titled ...
Read More
Recent News
Lutz Announces Redemption of Ron Nebbia’s Shares
Lutz, a Nebraska-based business solutions firm, announces the redemption of ownership held by ...
Read More
module-bg-desktop module-bg-mobile

Let’s get you where you want to go.

We work to simplify complexities, help make critical business decisions, and confidently focus on the things that are truly important to you. We embrace your business as our own to spark the right solutions and help you thrive.
Contact Us
Lutz-Logo-white
  • Services
    • Accounting
    • Consulting
    • Financial
    • M&A
    • Talent
    • Tech
  • About
    • Our Company
    • Our Team
    • Offices
    • Careers
    • Internships
    • Current Opportunities
  • Client Portal
    • Make a Payment
    • Accounting Client Portal
    • Financial Client Portal
    • Send Files Securely
    Submit RFP
TOLL-FREE: 866.577.0780 | © Lutz & company, PC 2025 | Privacy Policy
Follow us on Facebook Follow us on LinkedIn Twitter - X Logo Follow us on Instagram Follow us on Facebook