Property tax strategy for coastal CA owners, Prop 13, ADU/JADU reassessment rules, depreciation, and 1031 exchanges.
IRS examination of REPS claims focuses on contemporaneous time logs, material participation proof, and spouse election consistency. Coastal investors face heightened scrutiny.
Proposition 19 ended unlimited parent-child reassessment exclusions in 2021. Coastal landlords now face steep tax resets unless the heir occupies the home, or plans a strategic exit.
Coastal rental losses are passive by default. Under $100K AGI you can deduct $25K against W-2 income; from $100K–$150K it phases out; above $150K, all losses suspend. Here is the playbook for each tier.
IRS energy credits 45L, 179D, and 48E are sunsetting in 2026 and 2027. Coastal rental owners who place qualifying improvements in service before the deadlines unlock thousands per door, after that, the deductions vanish.
REPS lets coastal rental owners deduct unlimited rental losses against W-2 or business income. Here is the 750-hour test, the more-than-half-time test, and the documentation the IRS actually wants to see.
ADUs and JADUs both add a rentable unit, but property tax, permitting, owner-occupancy, and STR rules diverge sharply. A side-by-side breakdown for coastal California owners.
Cost segregation studies reclassify 20–40% of a coastal SFR's basis into 5- and 15-year property, unlocking immediate bonus depreciation and dramatically improving after-tax cash flow.