Tax Benefit for Higher-ish income earners

[Jeremah Graupman]

Let me start off by stating, I'm sure this question has been posted somewhere on this forum, but I cannot find the answer I'm looking for. My wife and I file taxes jointly in excess of $300,000/annually from our W2s and another $50,000+ from businesses. We currently have two rental properties, both owned in our names not in LLC. We are ready to move forward to begin acquiring more properties, but I am wondering what has everyone done in order to minimize taxes for their real estate? I see these "guru's" saying they don't pay any taxes or little to none. I prepare my taxes myself and cannot find a way to reduce my tax burden through real estate. I'm definitely naive on the tax side of things and we are about to begin talking with tax strategist to best maximize our deductions. I also am aware that we are increasing our net worth through real estate, but we are paying so much in taxes and cannot claim the renovations or improvements on the properties we own due to our income. We are looking at the compound asset acquisition and also using the short term rental loophole for our future properties and likely moving my wife into the real estate professional position while I remain at my W2 position.

To sum it up, I would like to know what higher income W2 earners are doing in order to help offset their W2 taxes or if there is a way?  We are also interested in knowing people's experiences utilizing tax strategists.  We are quickly moving that direction as there is obvious value in using them. 

Thank you and really enjoy this group!

[Ashish Acharya]

@Jeremah Graupman For high-income W-2 earners, minimizing taxes through real estate requires strategic planning. Since your combined income exceeds $300K, passive losses from long-term rentals are limited unless either you or your wife qualify as a Real Estate Professional (REPS). If your wife can meet the 750-hour and material participation requirements, rental losses could offset W-2 and business income, significantly reducing taxes.

The Short-Term Rental (STR) loophole is another powerful strategy since STRs are not classified as passive if you materially participate (100+ hours and more than any other person). This allows you to use depreciation, including bonus depreciation from cost segregation studies, to offset active income. Purchasing and managing STRs strategically could provide substantial tax benefits.

Renovation and improvement costs are typically capitalized and depreciated over time, but a cost segregation study can accelerate deductions, increasing your ability to offset income. Additionally, structured asset acquisition and 1031 exchanges can help defer gains, maintaining cash flow while avoiding immediate tax liabilities. Working with a tax strategist can help ensure you're maximizing every available deduction and tax-saving opportunity.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.