Skip to content
×
Try PRO Free Today!
BiggerPockets Pro offers you a comprehensive suite of tools and resources
Market and Deal Finder Tools
Deal Analysis Calculators
Property Management Software
Exclusive discounts to Home Depot, RentRedi, and more
$0
7 days free
$828/yr or $69/mo when billed monthly.
$390/yr or $32.5/mo when billed annually.
7 days free. Cancel anytime.
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Multi-Family and Apartment Investing
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated almost 4 years ago on . Most recent reply

User Stats

22
Posts
13
Votes
Donald F.
13
Votes |
22
Posts

How to reduce my active income tax liability? Bonus depreciation?

Donald F.
Posted

I have appx $250k worth of active income this far (commercial real estate broker), and I have another $300k in income coming (though I am rolling my fee as equity into the deal so it will not be reported as income on my tax return this year). 

What are the best ways to offset the huge majority of that $250k income I have? I was thinking bonus depreciation. However, I wanted a better idea of how much I would be able to offset. Hypothetically, if I invested $200k into an $800k duplex/triplex (financed $600k), what % of that do you think could typically be depreciated in year 1?

If you have any other creative tax incentives/ideas of how I can reduce my tax liability this year, I'd really appreciate it! Thank you.

Most Popular Reply

User Stats

609
Posts
366
Votes
Bonnie Griffin Kaake
  • Real Estate Consultant
  • Denver, CO
366
Votes |
609
Posts
Bonnie Griffin Kaake
  • Real Estate Consultant
  • Denver, CO
Replied

@Donald F. This is a specialty area of taxation. There are many tax and cash-flow benefits available all during the ownership of a commercial or residential rental property. It appears that you are in the 24% tax bracket. If you do a cost segregation study on the hypothetical $800k duplex/triplex, you can expect about 30-40% of the purchase price will consist of tangible property that can be depreciated in year one. You can usually count on about 6-10% of your purchase price in after tax cash-flow the first year. That is about $48k to $80k in taxes you don't have to pay and can reinvest. The American Institute of CPAs (AICPA) recommends to their member CPAs that a cost segregation study is done on EVERY property over the purchase price of $750k. It is usually beneficial for any commercial or residential rental over the purchase price of $200k. Our range nationally is $200k to $2 billion in purchase price. CSSI and I teach CPAs/tax professionals how to leverage tax benefits for their clients. 

There are many other benefits available to commercial property owners and I would be happy to talk to you about additional benefits of getting a cost seg done and beyond. Under the current administration, leveraging the available tax benefits is going to be even more important for commercial property owners. And, doing it with an engineering-based study (IRS' preferred methodology) with audit defense included, is going to be even more important. The IRS is currently hiring thousands of young aggressive and technically savvy tax professionals. Audits of depreciation schedules will be on the rise. Why pay more in taxes than you need to pay? Reinvest that bonus at a more lucrative rate of return than letting that money sit with the IRS.  

  • Bonnie Griffin Kaake
  • [email protected]
  • 303-475-4459
  • Loading replies...