2024 Real Estate Tax Mastery: Unlocking Deductions & Strategies for Property Owners

Curious about how real estate can help you grow your wealth and save on taxes?

In this episode, Mike Jesowshek discusses how real estate can serve as a tool for both wealth-building and tax savings. He emphasizes the concept of depreciation, whereby the cost of a rental property can be deducted over time, and explains how this, along with other operating expenses, can offset rental income. He also delves into strategies for utilizing passive losses to offset ordinary income, such as qualifying as an active real estate investor or a real estate professional. Additionally, he touches on the "short-term rental loophole" and the importance of considering exit strategies when selling real estate investments.

[00:00 - 05:21] Introduction and Overview of Real Estate Tax Planning

• Real estate serves as a powerful tool for both wealth-building and tax savings.
• Depreciation allows the gradual deduction of the purchase price of a rental property over time.
• Operating expenses, including utilities and real estate taxes, can also offset rental income.
• An active real estate investor status allows for a maximum deduction of $25,000 to offset ordinary income.

[04:00 - 13:41] Utilizing Passive Losses and Short-Term Rental Loophole

• Passive losses from rental properties cannot directly offset ordinary income but can be carried forward.
• The short-term rental loophole allows losses from short-term rentals to offset ordinary income under certain conditions.

[13:41 - 17:09] Considerations for Business Owners in Real Estate

• Business income in real estate is considered active income and requires different tax strategies.
• An S Corporation can be beneficial for business owners earning over a certain threshold.

[17:09 - 25:51] Exit Strategies and Conclusion

• Exiting real estate investments may trigger taxes, but strategies like 1031 exchanges can defer tax liability.

Quote:

"Don't get into real estate for tax savings. Get into real estate to grow your wealth and then experience the benefit of tax savings that comes with real estate as that cherry on top." - Mike Jesowshek, CPA

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

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