Tax Shelter Through Real Estate

[Jake Anderson]

Looking for ideas, not specific investments but general ideas, on sheltering income from tax by investing in real estate.  I will be earning some significant sums of income over the next two years.  Unfortunately none of this income will qualify for a 1031 exchange.  I looking for ideas to reduce my tax consequences through investment in rental properties (multi-family, single family, commercial or vacation rentals).  Not looking for anything shady just legitimate ideas.   

[Brandon Hall]

@Jake Anderson if by "significant" you mean over $150k, you will be unable to take any passive loss the real estate produces.

So if your rental(s) produce gross income of $10,000 and operating expenses of $6,000, your net operating income if $4,000. If your depreciation expense if $5,000, then you'll have a $1,000 loss for tax purposes.

Unfortunately, you will be unable to take that loss. Instead, it will become suspended and will carry forward into future years. 

However, the huge benefit that real estate offers is that, in the example above, you've received $4,000 of net income without having to pay a cent of tax on it.

So the strategy I'd recommend is to grow a portfolio quickly!