Buying Real Estate to Reduce Tax Burden

[Sean Nelson]

Newbie here. Im fascinated with the depreciation aspect of real estate and I have a question.

Lets say I own a few different non-real estate related businesses. And my earned income from those businesses equals about $275,000.

Now lets say I buy real estate for the sole purpose of achieving a depreciation write off which equals about $275,000/yr. This means I would have to have a real estate portfolio or a single property with a value of $7,562,500. Assuming im understanding tax law correct, i could write off $275,000 each year because $7,562,500/27.5 = $275,000
Lets just assume the real estate property doesnt even cash flow. I just break even.

So in simplification purposes, I would be paying no taxes right?
$275,000 in earned income - $275,000 in depreciation = $0 in taxable income?

Is this all above correct, or is there some limit Im missing out on? Is there ever a maximum amount of Depreciation that I can use to offset my earned income? For example, lets say I make $1,000,000 in earned income each year, but I have $1,000,000 in depreciation

[Bonnie Griffin Kaake]

@Sean Nelson @Steve Vaughan Most of the time, passive losses can only be used against passive income. RE professionals can group their properties and make all those "active" if they meet the material participation rules and keep excellent records. Owner/occupants also have the option to make their buildings "active" and use the large losses created by cost segregation and compliance with the Tangible Property Regulations against the business income. This last issue is a whole different discussion. Let me know if you have additional questions. I am here to help.