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PAs Amanda Han and Matthew MacFarland, who also invest in real estate, highlight a lesser-known tax strategy that benefits property investors. They specialize in tax-saving strategies for real estate investors through their firm Keystone CPA.

    One of the major tax benefits is "real estate professional status," or REPS, which allows qualifying individuals to shelter W-2 income by using rental losses. Typically, rental real estate losses are considered passive and can only offset passive income. However, if you're considered a real estate professional, it becomes one big activity, and you can deduct rental losses against active forms of income.

    The $25,000 "special allowance" is available for individuals with income under $100,000 who invest in long-term rentals. This allowance phases out when modified adjusted gross income reaches $150,000. Han notes that if you're making over $150,000 and trying to use real estate to offset W-2 income, either you have to be a real estate professional or married to one.

    The importance of REPS is illustrated by an example: if you earn $250,000 as an accountant and your spouse runs a rental real estate business generating $150,000 in losses, qualifying for REPS can deduct $150,000 from your income, resulting in a significant difference in tax liability. One couple used this strategy to "zero out" their income taxes for seven years.

    To qualify for REPS, you must spend more than 750 hours a year on real estate activities, have more than half your working hours in real estate, and materially participate in rental activities by being involved with the day-to-day operations. Han notes that this can be challenging, but it's an opportunity for stay-at-home spouses.

    If qualifying for REPS isn't possible, you can still reduce taxable income using a "short-term rental tax loophole." The IRS looks at short-term rentals differently and allows losses to offset W-2 income if the investor is involved in day-to-day operations. Han gives an example of someone earning $500,000 a year who could save $74,000 in taxes by generating a $200,000 tax loss from a short-term rental.

    To benefit from this loophole, your property must be a short-term rental with an average guest stay of seven days or less, and you must "materially participate" in managing the property. Anyone can benefit from this loophole, regardless of income level, making it more impactful for those with lower incomes.