Tax Strategies for 30A Real Estate Investors: 1031, Cost Seg, Bonus Depreciation

Why Taxes Matter on 30A: Context, Cash Flow, and Compliance

The Tax Strategies for 30A Real Estate Investors: 1031, Cost Seg, Bonus Depreciation framework can transform how your property performs on Florida’s Scenic Highway 30A. The coastal corridor including Seaside, Rosemary Beach, Alys Beach, Blue Mountain, and beyond thrive on short-term rentals, high seasonality, and premium ADRs. When cash flow spikes during peak months, your tax position either amplifies those wins or quietly eats into them. Smart planning helps you keep more of what you earn, reinvest, and scale.

The 30A Market: Short-Term Rentals, Seasonality, and Revenue Patterns

Most investors on 30A rely on short-term rental income that surges in spring and summer. With high average daily rates and strong occupancy, depreciation and timing strategies matter. Early-year acquisitions can maximize first-year deductions; late-year purchases can still capture accelerated deductions when placed in service before year-end (assuming qualifying property and timing).

Federal vs. Florida Taxes: What Applies to 30A Investors

Florida has no individual state income tax, which is great for individual owners. However, Florida imposes sales tax on short-term rentals, plus local options like county tourist taxes. These state and local rules sit on top of federal frameworks including 1031 exchanges, cost segregation, and bonus depreciation that drive your overall outcome. (Florida rental tax overview: Florida Dept. of Revenue brochure shows the 6% state tax plus discretionary surtax applies to rental of living or sleeping accommodations. Florida Department of Revenue)

Compliance note: This article is educational and not tax, legal, or accounting advice. Work with a CPA and 1031/QI pros familiar with 30A.

1031 Exchanges on 30A: Rules, Timelines, and Practical Examples

A well-executed 1031 exchange lets you sell an investment or business-use property and buy another like-kind U.S. real property without recognizing gain today because you defer it. Like-kind is broad for real property used in trade/business or investment. Personal-use property doesn’t qualify. (See IRS Form 8824 instructions for 45/180 rules and reporting. IRS)

Eligibility & Like-Kind Real Property

You can exchange an investment condo in Seagrove for a beachfront duplex in Seacrest or a small commercial building in Walton County. The key is both old and new properties are real property held for investment or business use not personal residences. (General IRS and practitioner guidance. IRS+1)

45-Day Identification & 180-Day Closing Rules

Two clocks matter:

• Identify replacement property within 45 days of transferring the relinquished property.
• Receive the replacement property within 180 days (or the due date of your return, including extensions, if earlier). (IRS 8824 instructions; IRS fact sheet reiterates these strict deadlines. IRS+1)

Miss either window and your exchange fails and the gain becomes taxable.

Qualified Intermediary (QI) & Common Pitfalls

Use a Qualified Intermediary so you don’t touch the proceeds; otherwise, it’s a sale. QIs handle exchange agreements, escrow funds, and documentation. Pitfalls include mishandled earnest money, weak identification (e.g., mis-addressed or vague legal description), or mixing personal property with real property. (Foundational guidance from IRS and major primers. IRS+1)

Debt Matching, Boot, and Basis Tracking

To avoid boot (taxable cash or non-qualifying property), match or increase your equity and debt on the replacement. Track your carryover basis for future depreciation and eventual gain recognition. These mechanics directly affect your exit plan and estate strategy. (General 1031 mechanics overview. Investopedia)

Cost Segregation on Coastal Properties: Turning 39/27.5 Years into 5, 7, 15

Cost segregation reclassifies portions of a property from long-life building (27.5-year residential or 39-year nonresidential) into shorter-life assets—often 5, 7, or 15 years—unlocking faster deductions. The IRS Cost Segregation Audit Techniques Guide frames the analysis: Is an item §1245 property (shorter life) or §1250 property (building/structural)? (IRS ATG. IRS+1)

What a Cost Seg Study Does (and When to Do It)

A professional study (engineer-led) identifies components like dedicated electrical, specialty lighting, certain finishes, site improvements (e.g., parking, landscaping for nonresidential), and builds a defensible report. Ideal timing is in the acquisition year or the year of a major renovation—but you can also do a look-back study and file Form 3115 for a change in accounting method to catch up missed depreciation (not covered in depth here; consult your CPA).

1245 vs. 1250 Property: Components That Move Faster

• §1245 (shorter life): personal property components tied to operations/tenants—often 5 or 7 years.
• §1250 (longer life): building structure and integral parts—27.5 or 39 years.
  The ATG emphasizes this exact split, and it’s the heart of cost seg. (IRS)

QIP (Qualified Improvement Property) for Nonresidential Spaces

QIP = interior, non-structural improvements to nonresidential buildings, post-service-date of the building (excludes enlargements, elevators/escalators, and structural framework). CARES Act fixed QIP to 15-year property, generally bonus-eligible when otherwise qualifying. (Authoritative summaries. The Tax Adviser+1)

Bonus Depreciation in 2025 and Beyond: Phase-Out Realities

Bonus depreciation once allowed 100% expensing, but it’s phasing down. Under current law, it was 80% (2023), 60% (2024), and is 40% in 2025, then 20% in 2026, and 0% in 2027+ unless Congress changes the rules. This matters when pairing cost seg with acquisition timing. (Planning article summarizing the enacted schedule. The Tax Adviser)

Tip: Always verify the latest IRS instructions for depreciation forms in the year you file. (See current Form 4562 instructions.) IRS

Pairing Cost Seg with Bonus Depreciation

If a study breaks out 5-, 7-, and 15-year property, those buckets may qualify for bonus (subject to placed-in-service dates and other rules). In 2025, a partial first-year write-off (e.g., 40%) still creates meaningful cash-flow relief—especially for high-ADR beach houses with substantial FF&E.

Short-Term Rentals on 30A: Passive vs. Non-Passive & Material Participation

Why does this matter? Passive losses generally can’t offset non-passive income. But some 30A short-term rentals can be non-passive if you materially participate, or if you qualify as a real estate professional (REP) under specific tests. The IRS Publication 925 details the passive activity rules and exceptions—essential reading if you plan to use large depreciation deductions from cost seg/bonus to offset other income. (IRS+1)

Practical angle: If your average guest stay is seven days or less and you materially participate (with documented hours), you may qualify for non-passive treatment—check the tests with your CPA.

Florida & Local Lodging Taxes for 30A Hosts

Florida Sales/Use & Discretionary Surtax on Rentals

Florida imposes 6% state sales tax on the rental of living/sleeping accommodations, plus discretionary surtax where applicable. If you operate STRs, registration, collection, and remittance are essential. (Florida DOR brochure GT-800034. Florida Department of Revenue)

Walton County Tourist Development Tax (TDT)

Walton County imposes a Tourist Development Tax on short-term stays. South of the Choctawhatchee Bay (covering most of 30A), the TDT is 5% in specific ZIP codes (32550, 32459, 32461, and portions noted). (County and state references. waltonclerkfl.gov+1)

Entity Structure & Exit Planning: Matching Strategy to Goals

• LLC (disregarded/partnership): Flexibility, liability protection; tax outcomes vary by members’ status and elections.
• S-Corp: Rarely used for holding appreciating real estate; can be useful for active management companies (not the property-owning entity).
• C-Corp: Less common for direct holds due to double taxation, but sometimes used in complex structures.
• Exit: 1031 to upsize or diversify; consider estate planning (step-up in basis potential). Pair entity choice with depreciation planning and recapture expectations (1245 vs. 1250 recapture rates). (Background on recapture concepts. EisnerAmper+1)

Step-by-Step Playbooks (Actionable Checklists)

Playbook A: 1031 into a Bigger 30A Asset

1. Engage a QI before closing the sale.
2. Build a replacement list early; verify addresses and legal descriptions.
3. Track 45/180 day deadlines on a shared calendar. (IRS)
4. Match equity and debt to avoid boot.
5. Close and file Form 8824 with your return. (IRS)

Playbook B: New Build or Heavy Reno with Cost Seg + Bonus

1. Scope improvements and FF&E; capture invoices and as-builts.
2. Hire an engineer-led cost seg firm; request audit-ready report. (IRS)
3. Identify 5/7/15-year components and potential QIP (nonresidential). (The Tax Adviser+1)
4. Apply bonus for qualifying property based on the current phase-out year. (The Tax Adviser)
5. Consider look-back study + Form 3115 when appropriate.

Playbook C: Converting a STR to Non-Passive

1. Track material participation hours contemporaneously.
2. Review average stay length and services provided.
3. Coordinate with your CPA on Publication 925 rules to target non-passive treatment. (IRS)

Common Mistakes 30A Investors Make (and How to Avoid Them)

• Missing 1031 timelines. Solution: Calendar reminders, backup IDs, and QI engagement early. (IRS)
• DIY cost seg. Solution: Use professional studies tied to IRS methodologies. (IRS)
• Ignoring bonus phase-out. Solution: Align acquisition/renovation timing with the current percentage. (The Tax Adviser)
• Misclassifying STR activity. Solution: Follow Pub. 925 tests and keep records. (IRS)
• Skipping Florida lodging taxes. Solution: Register and remit state sales tax + local TDT. (Florida Department of Revenue+1)

FAQs

1) Can I 1031 exchange my personal beach house on 30A?
No. 1031 applies to investment or business-use real property, not personal use. If you convert to rental and meet holding requirements, talk to your CPA about eligibility. (IRS)

2) What are the hard deadlines for a deferred 1031 exchange?
You must identify replacement property within 45 days and close within 180 days (or your return due date with extensions, if earlier). (IRS)

3) Is cost segregation risky?
It’s an accepted method when supported by a quality study. The core question is whether an item is §1245 or §1250 property—exactly what the IRS ATG addresses. (IRS)

4) How does bonus depreciation work in 2025?
Under current law, bonus depreciation is 40% in 2025, then 20% in 2026, and 0% in 2027+. Plan acquisitions and placed-in-service dates accordingly. (The Tax Adviser)

5) Do my 30A short-term rentals qualify as non-passive?
It depends. If you materially participate and meet specific criteria, losses may be non-passive. See IRS Publication 925 and consult your CPA. (IRS)

6) What taxes must I collect for 30A short-term stays?
Expect Florida’s 6% state sales tax plus discretionary surtax, and Walton County TDT (commonly 5% in key 30A ZIP codes). (Florida Department of Revenue+2Florida Department of Revenue+2)

7) Can QIP apply to my 30A beach house?
QIP applies to nonresidential buildings (interior, non-structural). Most 30A STRs are residential; however, mixed-use or commercial spaces may leverage QIP. (The Tax Adviser)

8) How is depreciation recapture handled on sale?
§1245 components (personal property) are usually recaptured as ordinary income; §1250 real property has different rules. Plan your exit with recapture in mind. (EisnerAmper)

Conclusion & Next Steps

When applied together, Tax Strategies for 30A Real Estate Investors: 1031, Cost Seg, Bonus Depreciation can defer gains, accelerate deductions, and unlock cash flow—especially in a high-performing market like 30A. Start by mapping your 12- to 24-month plan: Will you exchange into a bigger property, renovate and run a cost seg, or optimize STR participation to use losses more efficiently? Then layer in Florida tax compliance (state + TDT) so your strategy is bulletproof.

Helpful External Resource:

• IRS—Like-Kind Exchanges & Reporting (Form 8824 instructions): https://www.irs.gov/pub/irs-pdf/i8824.pdf