Ways to reduce tax liability on my cash flow

[Josh Garner]

Hey BP! What are some ways I can reduce my tax liability on my rental property? After reviewing my taxes, I earned $26,400 in rental income on my property, and all expenses (mortgage interest, repairs, depreciation, insurance, etc) totaled to about $13,900, leaving me with about $12,500 in taxable income. Any way to reduce this liability and invest these gains back into real estate without doing a cash-out refi?

[Buddy Holmes]

@Josh Garner, The first place to look is in the depreciation on your current rentals.  Either you have fantastic Cash Flow or you missed something in the depreciation.

Assuming you did the 27.5 year life calculation correctly the next step would be to see if you can do a Cost Segregation Analysis.  Here you look at the items in your rentals that can have 5 and 15 year life depreciation schedules.  If this is your first year with the schedule E's great.  write up a document of each 5yr item (floor treatments, light fixtures, etc ) and estimate the cost of each, sum the total and deduct from the initial purchase price used for the 27.5 yr and add the 5yr in with the special depreciation allowance the IRS gives you.  Repeat the above for the 15 year items which are the landscaping stuff outside.

Hope this helps. Cheers, Buddy