It takes careful planning to provide for your income in retirement, and real estate investments offer fantastic tax benefits to investors. These laws exist to encourage investments in the real estate market through incentives. Missed opportunities to keep more of your income can add up over time, and knowing what you can write off the taxes on your Baltimore, Maryland investment property can help guide your decisions and increase your profits over the long term. But, of course, real estate investing is a business, so you should treat it as such. In addition, each of these laws has qualifiers and complex nuances, so it is always recommended you work with a tax advisor to help.
You should begin developing methods in your daily work habits that improve your odds of building a prosperous portfolio. Organized record keeping is imperative, so you will want to develop a system that makes it easy for you to succeed. It is disheartening to consider the profits that uninformed real estate investors allow to slip through their fingers because of disorganization; you will need those receipts. Missed opportunities to keep more of your income add up over time. In addition, understanding what is not an allowable deduction can keep you from veering off the pathway to deductions.
If you would like to avoid missing out on your allowable deductions and be more prepared for meeting with a tax professional, read more about what you can write off of the taxes on your Baltimore, Maryland investment property.
Passive or Non-Passive
It’s essential to consider the differences between passive and non-passive real estate investment income and how tax law treats each. You can further benefit from these tax laws if you are not a material participant in your real estate investment business. In other words, as a passive investor, you can write off the taxes on your Baltimore, Maryland investment property through passive losses on your passive income. Document the time you spend actively participating in business activities and whether you wish to be treated as a real estate professional when you file your taxes. Suppose you spend more than half of your time participating in business activities or more than 750 hours. Then, you may be considered a “qualified” real estate professional in the eyes of the IRS.
Write-Offs
If it has to do with your investment properties and isn’t an improvement, but a necessary part of maintaining, managing, or the expenses you may incur for operations in your portfolio, are all areas of allowable deductions for real estate investors on your Baltimore, Maryland investment property.
Depreciation
One of the most considerable allowances to lower your taxes on your Baltimore, Maryland investment property is through depreciation. While depreciation involves no cash flow, it allows for a deduction from the taxable income based on gradual deductions over the useful life of the property’s improvements. This reduces your overall tax burden, even as your property potentially appreciates in market value.
Each real estate investment asset class falls under different timelines for depreciation—residential rental properties typically follow a 27.5-year schedule, while commercial buildings depreciate over 39 years. The land itself is exempt, as it does not depreciate. However, upgrades such as roofing, plumbing, HVAC systems, and even appliances can often be itemized for accelerated depreciation using cost segregation.
Understanding how to optimize depreciation is crucial for long-term investors aiming to increase ROI and reduce taxable income year after year.
Pass-Through Deduction
You should also be aware that you can write off the taxes on your Baltimore, Maryland investment property through the pass-through deduction, also known as the Section 199A Qualified Business Income (QBI) deduction. This incentive is currently available through the end of 2025 and allows for a 20 percent deduction on income from rentals on qualifying properties held through pass-through entities such as LLCs or sole proprietorships.
To qualify, your rental activity must meet IRS standards for a trade or business, and you must stay within certain income thresholds. This deduction can result in substantial tax savings for small- to mid-sized investors who structure their ownership entities correctly.
Working with tax professionals who understand investment property structures is essential to fully leverage the QBI deduction in your annual tax planning.
Capital Gains
You should also know how capital gains can affect the taxes on your Baltimore, Maryland investment property. When you sell a property, the IRS taxes the profits depending on how long you’ve held the asset. Short-term capital gains apply to properties held for less than one year and are taxed at your ordinary income rate, while long-term capital gains—for assets held over one year—are taxed at reduced rates, typically 0%, 15%, or 20% depending on your income bracket.
By holding onto your investment for longer periods or timing your sale to align with your tax situation, you can minimize capital gains liability. Additionally, factoring in depreciation recapture is critical, as any previously claimed depreciation deductions are subject to taxation upon sale.
Proper planning can help you keep more profit in your pocket while staying compliant with current tax laws.
Incentive Programs
You should also be aware that you can reduce or defer taxes on your Baltimore, Maryland investment property through programs like 1031 exchanges and Qualified Opportunity Zones (QOZs).
With a 1031 exchange, you can defer capital gains taxes by reinvesting the proceeds from a sold investment property into another “like-kind” property. This allows your investment capital to keep compounding without an immediate tax hit. Timing and IRS-compliant identification rules are crucial to executing a successful 1031 exchange.
Alternatively, investing in Qualified Opportunity Zones offers the chance to defer—and in some cases reduce—taxes on eligible gains. When you reinvest into a Qualified Opportunity Fund (QOF), you can defer gains until the earlier of the sale of your investment or December 31, 2026. If you hold the investment for 10+ years, you may eliminate any additional gains altogether.
These programs are powerful tools for long-term investors focused on growth and tax efficiency.
Special Loss Allowance
You should also be aware that through the special loss allowance, you may write off up to $25,000 in passive activity losses against your active income for your Baltimore, Maryland investment property—provided you meet specific income and participation requirements.
This allowance is available to individuals actively involved in managing their rental property and who earn less than $100,000 per year (with phase-outs beginning at that threshold and ending at $150,000). Passive losses can stem from expenses like repairs, depreciation, and mortgage interest. If unused in the current year, losses can often be carried forward to offset future gains.
Understanding this allowance can greatly reduce your tax bill and improve your net investment return.
Why Work With Perry Hall Investment Group
Why not work with a team of professionals experienced in real estate investments that stay up-to-date on how current tax laws affect investors, like a local professional investor at Perry Hall Investment Group? When you work with our professional investors at Perry Hall Investment Group, we’ll not only help you find the perfect property for your investment strategy—we’ll also show you how to maximize your deductions and write off the taxes on your Baltimore, Maryland investment property through smart tax planning.
From depreciation and capital gains strategies to leveraging 1031 exchanges, we’ve helped countless local investors make confident, tax-savvy decisions. At Perry Hall Investment Group, we offer access to expert guidance, investment-grade properties, and resources that can help you build wealth strategically and sustainably.
Let the pros at Perry Hall Investment Group help you earn the highest possible returns on your investment dollar. And don’t forget to ask about our current inventory of the best properties available in Baltimore, Maryland. We’re here to help you grow, protect, and optimize your real estate investments every step of the way. Call Perry Hall Investment Group at (410) 989-5200.