S-corp creation for tax purposes

[Alex Turchetta]

I had an interesting question for my cpa friends on here. My situation is slightly unique as real estate investing is slightly difficult due to my student loans. I have an exorbitant amount of student loans and my monthly payments are based off a percentage of my adjusted gross income. Therefore i try to put as much as I can in my SEP IRA in order to lower my AGI. As you can imagine this leaves little extra cash to invest in real estate (outside of my SEP which i dont want to do). I am paid as a 1099 employee (im a psychologist) and ive created an S-corp business for tax purposes for this 1099 income. My question is that if I purchase real estate through my S-corp (or create a different LLC/s-corp to purchase real estate) would that look like a loss/ expense in terms of my overall income from the S-corp and therefore lower my AGI? Im thinking that if I create a "real-estate investment business" and i make a down payment purchase on a home that would be a business expense and therefore subtract from total profit. I'm not sure how this would work and i am likely oversimplifying it. I am going to run this by my cpa but i thought i would put it out on this forum first to see what information anyone had. Any insight would be appreciated. Thanks in advance!

[Michael Plaks]

@Alex Turchetta

On a slightly different but related topic - you cannot really save taxes via S-corp if you're a contracting psychologist. Since all of your 1099 compensation is direct compensation for your professional services, the usual S-corp trick of setting a low salary for yourself breaks the rules. If the IRS ever looks into it, it will not hold water, and you will face high back taxes plus high penalties.

In other words, these are tax savings to you, but improper tax savings. If your CPA recommended this setup for you (i.e. set yourself a low W2 salary from your own S-corp) - then you need a better CPA.

PS. This setup works for other businesses, but not for self-employed professionals.