By Jason Watson, CPA
Posted Saturday, March 21, 2026

Single 2026
From	To	Rate	Marginal Tax	Total Tax
0	12,400	10%	1,240	1,240
12,401	50,400	12%	4,560	5,800
50,401	105,700	22%	12,166	17,966
105,701	201,775	24%	23,058	41,024
201,776*	256,225	32%	17,424	58,448
256,226	640,600	35%	134,531	192,979
640,601	forever	37%
Married Filing Jointly 2026
From	To	Rate	Marginal Tax	Total Tax
0	24,800	10%	2,480	2,480
24,801	100,800	12%	9,120	11,600
100,801	211,400	22%	24,332	35,932
211,401	403,550	24%	46,116	82,048
403,551*	512,450	32%	34,848	116,896
512,451	768,700	35%	89,687	206,583
768,701	forever	37%

* Start of Section 199A qualified business income phaseout for small business owners.

Standard Deduction Single	16,100
Standard Deduction Married Filing Joint	32,200
Social Security Wage Limit	184,500
IRA Contribution Limit	7,500 + 1,100 catch-up
Roth Income Phaseout Single	153,000
Roth Income Phaseout Married Filing Joint	242,000
401k Employee	24,500 + 8,000 catch-up
401k Employer	48,000
Max 401k Total	72,500 + 8,000 catch-up

By Jason Watson, CPA
Posted Saturday, March 21, 2026

The tax law is continuously changing from the acts of our government, from the decisions by the Tax Court and Federal courts, and through notices and private letter rulings from the IRS. In addition to changes, other topics of interest pop up in various trade journals such as Journal of Accountancy, Tax Adviser and Kiplinger’s Tax Letter. As we discover other issues concerning real estate, such as short-term rental loophole, material participation, real estate professional status, and all the gibberish in between, we want to get the word out right away.

More importantly, the frequent consultations we perform and the questions we field provide a steady stream of new ideas that are worthy of being wormed into this book. So, here’s to you- the intellectually curious real estate investor and small business owner helping others.

Currently this book is our 2026 Edition (3rd). While not necessarily a companion to our other book, Taxpayer’s Comprehensive Guide to LLCs and S Corps, this book was certainly inspired by it. Yes, it is our first edition. No, we’re not rookies. Similar to the genesis of our first book, I Just Got a Rental, What Do I Do? started as a compilation of several articles and blog posts that we’ve written over the years, and then we backfilled a bunch. We encourage you to visit our website for information on updates-

wcginc.com/book

In addition, please check out our blog from time to time for discussion of current tax issues-

wcginc.com/blog

Note: As much as we attempt to update our books periodically throughout the year, our blog posts allow us to provide more frequent updates. We encourage you to visit. We are a tax and consultation firm first, and a book-writing firm second; we kindly ask for some patience.

By Jason Watson, CPA
Posted Saturday, March 21, 2026

Conversational Tone

This book is written in a conversational tone. If you like perfect prose and editorial exactness that you would expect in a book on brain surgery, then we will be disappointing. We make jokes, some of which are only funny to ourselves. We don’t have the best punctuation. We might even have a missing word or a misspelling. We are nerdy accountants who did everything possible to avoid English literature and writing classes. Yuck!

Duplicate Content

You’ll see about 15 pages of duplicate content. We did this since everyone jumps into a book at different places, especially with our online Knowledge Base version. Time is all you have on earth to sell, and it cannot be inventoried nor is it refundable; just do a Bob Seger and turn the page if you’ve seen it before.

Artificial Intelligence

AI is the big sexy term for 2024 and beyond. No, this book was not written by AI. Yes, we use AI for some research but frankly it is no different than any internet search- you find the buzzwords and connected terminology, and then you dig into the tax code, court cases and other writings. All the words in this book are our words, except when quoted with an indent and reference. AI is just a tool not the only tool- like any tool, you need to select the correct tool for the job, and then use the tool correctly.

AI is just a tool but not the only tool- like any tool, you need to select the correct tool for the job, and then use the tool correctly.

The problem with AI as we presently see it is the Mark Twain phrase- it’s not what you don’t know that gets you into trouble. It is what you know to be certain that just ain’t so. In other words, ChatGPT, Gemini, Claude and others are very confident in their commentary. As such, you poke and push back and prod, and dig into the tax code and court cases, and make it defend itself. “You were right to pusb back on that- you’re right, I was conflating two concepts.” “Yup, you were but I still like you.”

Oh, and we do cheat from time to time and use AI to make images and graphics.

How Did We Get Here?

As mentioned, we found success and professional pleasure with our first book, Taxpayer’s Comprehensive Guide to LLCs and S Corps, which is aimed mostly at small business owners looking for sound business advice and tax reduction strategies. Specifically, the book expands on basic topics such as entity structures, liability protection, benefits and downsides to S corporations, how to elect S Corp status, shareholder payroll, reasonable salary determination, retirement planning and tax planning.

Ok, now what? We recognized a hole in the real estate investor and rental property taxation landscape. Several amazing articles are out there. Several wonderful books on how rentals work and what makes a good rental property are available. However, there is not a lot of concentrated information on taxation of rental properties and real estate investments.

To be certain, and a point that we aim to drive home repeatedly, your job as a real estate investor is not to save taxes. Your primary objective is to build wealth. Yes, saving and at times, deferring taxes, can help build wealth. Far too often we see people chasing the tax buck versus the wealth vision. You can do both, and you can even do them concurrently, but the primary objective remains building wealth. No one sits around at the bingo parlor bragging up how much they saved in taxes through the years.

I Just Got A Rental, What Do I Do?, however, is not a book about determining the efficacy of a real estate investment or rental property purchase. While we have several opinions and professional recommendations on deal structures and lending combinations, we do not present them in our book. It will also not specifically guide you on running your rental, choosing your tenants or guests, or finding success in the short-term rental space.

Rather, this book is about the tax effects of real estate investing and owning rental properties, and is written with the general taxpayer in mind. Too many resources simply regurgitate complex tax code without explanation. While in some cases tax code and court opinions are duplicated verbatim because of precision of the words, this book strives to explain many technical concepts in layperson terms with some added humor and cheeky opinions. We believe you will find this book educational as well as amusing.

Enjoy! And please send us all comments, hang-ups and static. This book is as much yours as it is ours, except the tiny royalty part- that’s ours. Stop by and we’ll buy you a beer with the pennies.

WCG CPAs & Advisors
2393 Flying Horse Club Drive, Colorado Springs CO 80921

719-387-9800 office

support@wcginc.com

By Jason Watson, CPA
Posted Saturday, March 21, 2026

This book originally was a collection of Knowledge Base articles and blog posts that were written to help real estate investors and rental property owners. The unintended benefit was helping our own small business, WCG CPAs & Advisors, grow and thrive through educational marketing. As of March 2026, we have 7 partners and over 100 tax and accounting professionals.

Since you probably paid some money for the privilege of being bombarded with shameless self-promotion, we hope you take our comments with a grain of salt (and perhaps some tequila and lime to go with the salt). Our primary focus is to-

• educate you,
• minimize your tax consequence,
• maximize your wealth, and
• keep you out of trouble.

If you read this, arm yourself with knowledge and then ask pointed questions of your current accountant and other professionals, we are completely happy. We have done our job with this book.

Having said that, if you want WCG’s assistance in whatever capacity necessary, from quick second opinions to full-time service, we are also happy to provide that. Want more information? The Epilogue in the back of this book has all kinds of continued self-promotion and supportive material.

By Jason Watson, CPA
Posted Monday, July 7, 2025

We toss around a lot of terms and not always in the best order. As such, here is a quick glossary-

Adjusted Basis

Adjusted basis refers to any adjustments made to the original purchase price of an asset over time usually because of depreciation.

Bonus Depreciation

An accelerated method allowing large amounts of first-year depreciation deduction of qualifying property. For the 2025 tax year, bonus depreciation is back to 100% for property acquired and placed in service after January 19, 2025, thanks to the One Big Beautiful Bill Act (OBBBA). However, 2023 remains at 80% and 2024 remains at 60%. Oh, and keep the words acquired and place in service in mind as well.

Capital Expenditure

A cost that improves or extends the life of a property and must be depreciated unless a capitalization exception applies.

Capitalization

The process of adding a cost to the asset’s basis rather than deducting it immediately. There are several safe harbors and other provisions that can circumvent capitalization (since most taxpayers are not a fan of being forced to capitalize certain expenditures).

Cost Segregation Study

A report that analyzes a building and its components, and separates certain items into 5-, 7-, 15-year asset classes. This allows for accelerated depreciation since depreciation schedules shrink from either 27.5 or 39.0 years to something shorter. It is generally a cash flow play.

De Minimis Safe Harbor

IRS rule allowing small-dollar purchases (under $2,500) to be expensed immediately.

Depreciable Basis

Depreciation is a measurement of the “useful life” of a business asset, such as machinery or a building, to determine the multiyear period over which the cost of that asset can be deducted from taxable income. Depreciable basis is the portion of the asset that is available for depreciation (i.e., land is not depreciated).

Depreciation Recapture

If you sell or otherwise dispose of depreciated business property including real estate property for a gain (the sale price exceeds the adjusted cost basis), depreciation recapture permits the IRS to take back (i.e., “recapture”) some of the tax benefits you received over the years through depreciation deductions. As such, depreciation might be a little tax bomb or IOU to the IRS.

Fixed Asset Listing (FAL)

Fixed assets are long-term assets. This means the assets have a useful life of more than one year. Fixed assets include property, plant, and equipment (PP&E) and are recorded as such on your tax returns (and financial statements should you have a balance sheet).

Internal Revenue Code (IRC)

The IRC can be found in Title 26 of the United States Code or “26 USC.”

K-1

A K-1 is similar to a W-2 since it reports income and other items for each member, partner, shareholder, owner or beneficiary. It is coded to tell the IRS how the business activities should be treated. A K-1 is generated by an entity since the entity is passing along the income tax obligation to the K-1 recipient (hence the concept pass-through entity, or PTE).

Nexus

State tax nexus is an important concern for real estate investors that have a multistate presence because of activities in other states. Nexus is a threshold issue that must be evaluated to determine whether an activity has a tax filing obligations in a particular jurisdiction. State tax nexus refers to the amount and type of business activity that must be present before the business is subject to the state’s taxing authority. State tax nexus considerations differ by tax type and jurisdiction, and there has been limited guidance from tax authorities as to when nexus conclusively exists. Various business and real estate activities could create state tax nexus for sales and use tax, income tax or franchise tax.

Nonpassive or Non-Passive

If you materially participate in an activity, such as a trade, business or rental activity, then it is considered nonpassive. At times, people will call this “active.” Passive is passive, nonpassive can also be called active. Gee whiz stuff- the Treasury Regulations hyphenate non-passive; however, the IRS publications and website overwhelmingly use nonpassive without the hyphen.

Non-Residential Property

Property depreciated over 39.0 years, often applies to short-term rentals where the average guest stay is less than 30 days or commercial buildings including dormitories and nursing homes. Being considered non-residential changes a few things namely Qualified Improvement Property and the intersection with Section 179 expensing.

Operating Agreement

A legal document outlining ownership and management of an LLC.

Out of Service

The point at which an asset (rental property) is no longer being held for the production of income. This is in turn limits deductions and material participation time.

Partial Asset Disposition (PAD)

Tax provision allowing loss recognition on replaced property components.

Passive Activity Loss Limitations

Generally, passive activity losses that exceed the passive activity income are disallowed for the current year. You can carry forward disallowed passive losses to the next taxable year. Passive activities include trade or business activities in which you don’t materially participate.

You materially participate in an activity if you’re involved in the operation of the activity on a regular, continuous, and substantial basis. In general, rental activities, including rental real estate activities, are passive activities even if you materially participate. However, rental real estate activities in which you materially participate aren’t passive activities if you qualify as a real estate professional.

Placed In Service

This is not the date the property is first rented. An asset (rental property) is “in-service” when it is ready and available for occupancy, and held out for rental use through advertising and related efforts. Having your rental property be considered in-service is huge for depreciation, operating expense deductions and material participation. The tax code reads in part, “property is first placed in service when first placed in a condition or state of readiness and availability for a specifically assigned function, whether in a trade or business, in the production of income, in a tax-exempt activity, or in a personal activity.”

Real Estate Professional Status (REPS)

If certain conditions are met, a taxpayer can be considered a real estate professional which changes the color of money from inherently passive to nonpassive, and losses are not limited by passive activity loss limitations.

Safe Harbor

A safe harbor refers to a provision that provides protection from liability or penalties under specific situations or conditions. Commonly, safe harbors present numbers or other “bright lines.” Rather than defending your tax position with facts, circumstances and arguments, you can defend the position by meeting or exceeding a list of criteria. There are several safe harbors within the tax code.

Section 1245 Property

Personal property that is subject to the allowance of depreciation.

Section 1250 Property

Real property such as rental properties and commercial buildings are subject to the allowance of depreciation. It does not include tangible or intangible personal property or land.

Section 179

A way to expense certain purchases that qualify. Some call this instant depreciation but it is technically an expensing tool.

Section 179 Recapture

Similar to depreciation recapture where the benefit of Section 179 is added back as ordinary income less typical depreciation allowed. This occurs when the asset or property is no longer predominantly used for business which is generally 50% or less.

Short-Term Rental

A rental property where the average guest stay is fewer than 30 days. For the loophole, average guest stay needs to be 7 days or fewer.

Step-up in Basis

The step-up in basis provision adjusts the value, or “cost basis,” of an inherited asset (stocks, bonds, real estate, etc.) when it is passed on, after death. This often reduces the capital gains tax owed by the recipient. The cost basis receives a “step-up” to its fair market value, or the price at which the good would be sold or purchased in a fair market.

Treasury Regulations (“the regs”)

Treasury regulations (commonly referred to as federal tax regulations) provide the official interpretation of the IRC by the Department of the Treasury and give directions to taxpayers on how to comply with the IRC’s requirements. Also referred to as Code of Federal Regulations, or “26 CFR.”

Unadjusted Basis

Unadjusted basis is the initial value assigned to an asset. It includes the cash cost or price of an asset, any liability assumed to acquire the asset, any asset the purchaser gave to the seller as part of the transaction, and any purchase expenses incurred to acquire the asset.

Vacant Property

A rental property that is in service but temporarily without tenants.

By Jason Watson, CPA
Posted Sunday, May 25, 2025

Single 2025
From	To	Rate	Marginal Tax	Total Tax
0	11,925	10%	1,193	1,193
11,926	48,475	12%	4,386	5,579
48,476	103,350	22%	12,073	17,651
103,351	197,300	24%	22,548	40,199
197,301*	250,525	32%	17,032	57,231
250,526	626,350	35%	131,539	188,770
626,351	forever	37%
Married Filing Jointly 2025
From	To	Rate	Marginal Tax	Total Tax
0	23,850	10%	2,385	2,385
23,851	96,950	12%	8,772	11,157
96,951	206,700	22%	24,145	35,302
206,701	394,600	24%	45,096	80,398
394,601*	501,050	32%	34,064	114,462
501,051	751,600	35%	87,693	202,155
751,601	forever	37%

* Start of Section 199A qualified business income phaseout for small business owners.

Standard Deduction Single	15,000
Standard Deduction Married Filing Joint	30,000
Social Security Wage Limit	176,100
IRA Contribution Limit	7,000 + 1,000 catch-up
Roth Income Phaseout Single	150,000
Roth Income Phaseout Married Filing Joint	236,000
401k Employee	23,500 + 7,500 catch-up
401k Employer	46,500
Max 401k Total	70,000 + 7,500 catch-up

By Jason Watson, CPA
Posted Wednesday, October 18, 2023

Single 2024
From	To	Rate	Marginal Tax	Total Tax
0	11,600	10%	1,160	1,160
11,601	47,150	12%	4,266	5,426
47,151	100,525	22%	11,743	17,169
100,526	191,950	24%	21,942	39,111
191,951*	243,725	32%	16,568	55,679
243,726	609,350	35%	127,969	183,647
609,351	forever	37%
Married Filing Jointly 2024
From	To	Rate	Marginal Tax	Total Tax
0	23,200	10%	2,230	2,230
23,201	94,300	12%	8,532	10,852
94,301	201,050	22%	23,485	34,337
201,051	383,900	24%	43,884	78,221
383,901*	487,450	32%	33,136	11,357
487,451	731,200	35%	85,313	196,670
731,201	forever	37%

* Start of Section 199A qualified business income phaseout for small business owners.

 

Standard Deduction Single	14,600
Standard Deduction Married Filing Joint	29,200
Social Security Wage Limit	168,600
IRA Contribution Limit	7,000 + 1,000 catch-up
Roth Income Phaseout Single	146,000
Roth Income Phaseout Married Filing Joint	230,000
401k Employee	23,000 + 7,500 catch-up
401k Employer	46,000
Max 401k Total	69,000 + 7,500 catch-up

By Jason Watson, CPA
Posted Wednesday, October 18, 2023

Single 2023
From	To	Rate	Marginal Tax	Total Tax
0	11,000	10%	1,100	1,100
11,001	44,725	12%	4,047	5,147
44,726	95,375	22%	11,143	16,290
95,376	182,100	24%	20,814	37,104
182,101*	231,250	32%	15,728	52,832
231,251	578,125	35%	121,406	174,238
578,125	forever	37%
Married Filing Jointly 2023
From	To	Rate	Marginal Tax	Total Tax
0	22,000	10%	2,200	2,200
22,001	89,450	12%	8,094	10,294
89,451	190,750	22%	22,286	32,580
190,751	364,200	24%	41,628	74,208
364,201*	462,500	32%	31,456	105,664
462,501	693,750	35%	80,938	186,602
693,751	forever	37%

* Start of Section 199A qualified business income phaseout for small business owners.

 

Standard Deduction Single	13,850
Standard Deduction Married Filing Joint	27,700
Social Security Wage Limit	160,200
IRA Contribution Limit	6,500 + 1,000 catch-up
Roth Income Phaseout Single	138,000
Roth Income Phaseout Married Filing Joint	218,000
401k Employee	22,500 + 7,500 catch-up
401k Employer	38,500
Max 401k Total	66,000 + 7,500 catch-up

By Jason Watson, CPA
Posted Saturday, August 3, 2024

The information materials and opinions contained on the WCG CPAs & Advisors website and in this book are for general information purposes only, are not intended to constitute legal or other professional advice and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances.

WCG Inc. and Jason Watson make no warranties, representations or undertakings about any of the content of our website and this book (including, without limitation, any as to the quality, accuracy, completeness or fitness for any particular purpose of such content), or any content of any other website referred to or accessed by hyperlinks through our website and this book. Although we make reasonable efforts to update the information on our site and this book, we make no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up to date.

Please contact us for additional information or seek the advice of other professionals as it pertains to your unique situation.

By Jason Watson, CPA
Posted Saturday, August 3, 2024

Jason Watson is a Senior Partner for WCG CPAs & Advisors, a boutique yet progressive tax, accounting and consultation firm located in Colorado Springs, Colorado. He has been a real estate investor and landlord since 1997, and holds both a Bachelor’s and Master’s in Business Administration from the University of Wisconsin – Madison. Go Badgers!

Aside from carrying the one in accounting class, his desire is speaking with real estate investors and creating a dynamic map for the future. Jason enjoys talking about entity structures (for elegance and efficiency), tax planning, and leveraging the myriad of tax rules aimed at rental properties. He is quick to point out that while 70% of all situations can be covered with the basics, every real estate investment and person is truly unique. One of his Jason-isms is “every house has four walls and a roof, but inside, the things that are personal to you, are different than your neighbor’s.

Ask a question and have a tablet handy, and you’ll see the true passion of a person who not only wants to educate but also wants to see rental property owners thrive. While this book on real estate investment taxation can be labeled as shameless self-promotion, it truly came from Jason’s heart to help landlords everywhere. And No! He doesn’t unnecessarily complicate things; while complication is great cocktail party fodder, most often it is the illusion of precision.

Lastly and most importantly, he is a father of three wonderful, amazing and perfect children (posturing is the new past time in Colorado Springs) and is married to WCG’s founder and Senior Partner, Tina Watson, CPA.

You can contact Jason at 719-428-3261 (direct) or jason@wcginc.com.