All Forum Posts by: Sammy Habbaz

Quote from @Ron Singh:

Quote from @Jon Martin:

Quote from @Lisa Marie:

So, along that line, I would like to know how many people on this thread have actually done cost segs on their properties and how much W2 income tax you saved from that. 

I paid $600 for a cost seg that will take $60K (80%*75K) off of my taxable income for 2023. I won't say what my W2 income is but I will say I expect to save over a quarter of that of that amount between fed and state taxes. So yeah, absolutely worth it. I can also say that the money I save by self managing, even when broken down per hour, is not far off from my "hourly wage" based on my salary. I look at it as a side hustle where I pay myself. 

Like @Ryan Moyer said I can utilize that cash now to invest in more properties and kick the can down the road, potentially past my time on earth. That cash is worth much more to me now in the scaling stage. 

As for your "better off in the stock market" comment, your analysis is flawed because it is based on an equal cash vs cash assumption. Most people do not have that kind of cash to put into the market, but maybe we can scrounge up 15-20% of that for a down payment. That's the power of leverage in real estate, where I can pull the returns of a $1M investment with 20% of the cash. I can't do that at Charles Schwab. 

Regarding what you said about not investing solely for the purpose of utilizing cost seg and bonus depreciation, sure, I would agree that your decision to invest in an STR should go beyond that and should work in its absence. In a related example, I was looking to get in to a property before year end to lower my tax bill further. Then I realized that if I don't have enough cash to invest in a property for 2024 tax year, then I am better off waiting until then because another cost seg will lower my tax burden within a reduced tax bracket for 2023. Whereas in 2024, that bonus depreciation, even at 60%, will be worth more if that's the only property I buy between now and the end of 2024. So yes, there is nuance and people should take a close look at their situation to see if it makes sense, but at the very least the first seg I mentioned is an absolute no brainer for me.

 Great points

curious on 60k segregated value , what is the value of building just to get an rough idea.

I need to deduct similar amount in 2023, and trying to see how big of a property I have to buy to come close to your deduction numbers. 

Tagging gurus: 

@Michael Baum, @Ryan Moyer, @Nancy Bachety, @Arda Bircan

Trying to see if you can share any rough idea on how big of a property would qualify for 80k-100K in deduction? 

As segregation takes items into account like appliances, roof, building material etc.. would it be okay to estimate below:

>> 500k property value (150 land+350 built), can provide around 80K in max deduction on year 1 ?

Would it differ or matter if property is being used as short term(i.e airbnb) Or Longterm rental ?

can shortterm rental allow any additional deductions as compared to long term  ?

Quote from @Lisa Marie:

So, along that line, I would like to know how many people on this thread have actually done cost segs on their properties and how much W2 income tax you saved from that. 

I paid $600 for a cost seg that will take $60K (80%*75K) off of my taxable income for 2023. I won't say what my W2 income is but I will say I expect to save over a quarter of that of that amount between fed and state taxes. So yeah, absolutely worth it. I can also say that the money I save by self managing, even when broken down per hour, is not far off from my "hourly wage" based on my salary. I look at it as a side hustle where I pay myself. 

Like @Ryan Moyer said I can utilize that cash now to invest in more properties and kick the can down the road, potentially past my time on earth. That cash is worth much more to me now in the scaling stage. 

As for your "better off in the stock market" comment, your analysis is flawed because it is based on an equal cash vs cash assumption. Most people do not have that kind of cash to put into the market, but maybe we can scrounge up 15-20% of that for a down payment. That's the power of leverage in real estate, where I can pull the returns of a $1M investment with 20% of the cash. I can't do that at Charles Schwab. 

Regarding what you said about not investing solely for the purpose of utilizing cost seg and bonus depreciation, sure, I would agree that your decision to invest in an STR should go beyond that and should work in its absence. In a related example, I was looking to get in to a property before year end to lower my tax bill further. Then I realized that if I don't have enough cash to invest in a property for 2024 tax year, then I am better off waiting until then because another cost seg will lower my tax burden within a reduced tax bracket for 2023. Whereas in 2024, that bonus depreciation, even at 60%, will be worth more if that's the only property I buy between now and the end of 2024. So yes, there is nuance and people should take a close look at their situation to see if it makes sense, but at the very least the first seg I mentioned is an absolute no brainer for me.