3 Ways Real Estate Syndication Can Support Your Tax Strategy

Consider these factors before you make a new investment

How Real Estate Syndication Can Support Your Tax Strategy

Consider these factors before you make a new investment.

Real estate syndications are one of the best ways to access the full tax benefits of real estate ownership while still investing passively.

This is one of the key differentiators between investing in a syndication versus investing in a real estate investment trust or a fund. Investments in a REIT or a fund are treated as ordinary dividend income by the IRS. This means that you pay higher taxes on that income and are not able to claim some of the common real estate deductions and tax benefits.

These benefits include depreciation (ex: bonus depreciation) and the ability to defer taxes with 1031 exchanges. In this article, we’ll answer some of the most common questions about the tax benefits of real estate syndications and share some valuable strategies for making the most of these opportunities.

What is Bonus Depreciation, and How Can You Take Advantage of It?

With bonus depreciation, businesses can immediately expense eligible assets in their first year of service, rather than claiming depreciation across a longer time period. This can offset income in the first year after acquiring a new property.

When used effectively, bonus depreciation will lower the amount of income tax you pay while also generating passive income through your investment. To do this, businesses may implement a cost segregation study, identifying all property-related costs that can be depreciated faster per IRs guidelines. This could apply to an acquired property, new construction, or even remodels and build-outs.

This tax incentive is particularly time sensitive, as bonus depreciation will begin to phase out starting Jan. 1, 2023. Any assets acquired and placed in service in 2023 will be eligible for 80% bonus depreciation. In 2024, the deduction will lower to 60%, then 40% in 2025, and so on until it phases out completely in 2027.

Keep in mind that bonus depreciation has been introduced and expired before (2008-2013). It’s intended to incentivize taxpayers to purchase eligible assets and could be introduced again in the future. We recommend keeping an eye out for any IRS pronouncements of new incentives that could impact your investments in the coming years.

How Do You Use a 1031 Exchange to Defer Taxes?

A 1031 exchange is a unique strategy that allows you to defer capital gains taxes from a property sale and instead reinvest the proceeds by purchasing a new property. Not only does it allow you to defer taxes, but it also gives you the opportunity to reinvest your earnings into a higher-value or more cash flowing property.

1031 exchanges must be structured correctly and completed within a limited timeframe. Within 45 days of relinquishing your first property, you must identify a new property you plan to purchase. You must also close on that new property within 180 days.

The new property you purchase must also be of “like kind” to the original property, and it needs to have greater or equal value to the property you’re selling.

Because this strategy has such specific requirements, the best way to ensure your 1031 exchange is conducted correctly is by working with an experienced partner like Excelsior Capital.

Are All Syndication Deals Equally Tax Efficient?

Real estate syndication can provide a great opportunity for increasing the tax efficiency of your portfolio, but not all deals are created equally.

To access the full range of tax benefits, make sure you’re working with a sponsor who prioritizes tax efficiency when sourcing and structuring their deals.

At Excelsior Capital, we understand that syndication deals give investors a unique opportunity to directly own real estate and access its full tax benefits. We take our responsibilities seriously and make sure to carefully vet each deal, prioritizing inflation-resistant, stable commercial opportunities.

If you’re an accredited investor looking to access the full tax benefits of direct real estate investment, we’d love to connect with you. Simply fill out this form to get in touch.

Previous Articles


The Ultimate Guide to Commercial Real Estate Investing

Learn everything you need to know to assess the benefits of a commercial real estate investment and make the best decisions to get started.

Mental Wellness and The Workplace

Dive into this episode as Corbitt Huseth reveals the transformative power of physical activity on mental health.

The Founder’s Exit Paradox

How do we find true happiness and connection in a world dominated by success metrics and the relentless pursuit of achievement?

Geothermal Energy Explained

Cindy Taff, the CEO of Sage Geosystems, joins us in this episode to discuss the development of geothermal technology and how it can be used as a viable energy source.

What Does It Take To Set Up An Effective Family Office

In this episode, Richard Jason Wolkowitz discusses how the family office concept has evolved over the years.


The Risk of Deflation, What Is Deflation?

What is deflation? Deflation occurs when consumer and asset prices decline over time, effectively increasing your purchasing power.


Internal Rate of Return (IRR) vs. Cash Yield: What’s The Difference?

Among the myriad of data points available, there’s two that stand out as key indicators of profitability: Internal Rate of Return (IRR) and Cash-on-Cash Return.


Inflation and its Impact on Investors

In this inaugural segment, we will focus on the concept of inflation, its potential implications for investors, and discuss how to feel more secure…


Is Now a Good Time to Invest in Commercial Property?

In the world of alternative investments, few sectors have garnered as much respect for their stability and long-term appreciation potential as commercial real estate.

Excelsior Capital

A real estate private equity firm that owns and operates high quality multi-tenant office assets in emerging secondary markets.

Interested in learning more about Excelsior's investment opportunities?

Excelsior Capital

104 Woodmont Blvd, Suite 120
Nashville, TN 37205




Disclaimer: Under no circumstances should any information presented on this website be construed as an offer to sell, or solicitation of an offer to purchase any securities or other investments. This website does not contain the information that an investor should consider or evaluate to make a potential investment. Other materials related to investments in entities managed by Excelsior Capital are not available to the general public.