Understanding IRS Section 179 is key to optimizing your tax strategy.179 lets businesses expense certain assets upfront instead of depreciating them over time.For 2025, up to $1.22M of qualified equipment and software can be expensed, but there are limits.The maximum investment threshold is $3.05M, reducing the deduction dollar-for-dollar if exceeded.Additionally, the Section 179 deduction cannot surpass your taxable business income, and some assets, like real property, generally don’t qualify unless specified as "qualified improvement property."

If you plan to move forward with this, definitely get a qualified 1031 specialist and an tax attorney involved so that you check all the boxes and structure the deal properly.

Germain Act for certain family-to-family transfers, which is limited and may not help in this case if you’re not moving in as your primary residence).A potential hybrid route could be your parents retaining ownership and allowing you to “rent” or pay the mortgage directly for now, while you save or arrange financing to formally buy it from them later.

Since the property is your primary residence, it would not qualify for 1031 exchange treatment; the 1031 exchange is only for the sale and purchase of investment real estate.2.

Generally, we would recommend working with a Qualified Intermediary to make sure the process is done with the loan and complying with the 1031 exchange rules and regulations.

You're likely not qualifying for real estate professional status unless you have a non working spouse.

@Eric Amundson, You can't do a 1031 exchange into non-real estate passive investments because it has to be investment real estate for investment real estate.However, there are syndications that do qualify for 1031 treatment because of how they are structured, such as UPREITS (Real estate investment trust), or DSTs (Delaware statutory trust).

Let me break it down for you in a more conversational way:If you and your spouse are currently limited in how much you can deduct from your long-term rentals (LTRs) because of passive loss limitations, adding a short-term rental (STR) can potentially open the door to a completely different tax benefit, even without qualifying as a full-fledged real estate professional.Here’s how it works:The IRS treats STRs differently if the average stay is 7 days or less—these aren’t considered traditional rentals, so the income (and loss) isn’t automatically passive.That means if you can prove material participation—like doing most of the guest communication, cleaning coordination, pricing, etc.

Since you’re teaming up with two lifelong friends, it’s essential to formalize everything even if there’s strong trust.Start by forming a multi-member LLC in the state where you’ll invest.

I originally purchased this 2 bed / 2 bath single family home as owner occupied since I qualified for the down payment assistance program for first time homeowners.