BiggerPockets Real Estate Podcast

823: The Tax-Free Strategy Only Real Estate Investors Can Access w/Mitchell Baldridge

Sep 26, 2023

CPA and CFP Mitchell Baldridge explains how cost segregation can help real estate investors lower their taxes and build their portfolios faster. Topics discussed include wiping out income taxes, bonus depreciation, using real estate losses to lower income, the short-term rental tax 'loophole,' carrying over losses, and the pitfalls of cost segregation.

01:04:35

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Episode guests

Mitchell Baldridge

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Quick takeaways

Cost segregation allows real estate investors to accelerate depreciation and reduce their tax bill.

Real estate losses can be used to offset other types of income if one qualifies as a real estate professional.

Careful planning and consideration are necessary when implementing tax strategies like cost segregation.

Deep dives

Cost Segregation: Accelerating Real Estate Depreciation

Cost segregation is a tax strategy that allows real estate investors to accelerate depreciation and reduce their tax bill. By breaking down a property into different components and assigning shorter tax lives to certain assets, investors can take larger deductions in the first year. This strategy is particularly beneficial for properties with high improvement values and extensive land improvements. The bonus depreciation allowed by the Tax Cuts and Jobs Act of 2017 further enhances the tax savings potential. However, it is important to consider factors like tax brackets, excess business loss rules, and potential recapture when deciding to implement cost segregation.

Explaining Cost Segregation and its Benefits in Real Estate Investing

01:43

Understanding Bonus Depreciation and Net Operating Loss in Real Estate

01:21

Aggregating Income Sources for Tax Deferral and Reduction

02:48

Introduction

2min

Using Tax Strategy to Compound Wealth in Real Estate

2min

Key Insights and Introduction of Mitchell Baldridge

5min

Understanding Real Estate Taxes and Cost Segregation

22min

Real Estate Professionals and Passive Income

6min

Material Participation in Short-Term Rentals

22min

Cost Segregation Study as an Exit Strategy for Real Estate Investors

5min

Social Media, Thanking the Guest, and Introducing a Beta Membership

2min

What’s the key to paying fewer taxes? A cost segregation study. Never heard of it? Most real estate investors haven’t, but we’re about to unlock a world of tax-free income earning using this specific tool. If you’ve wondered how the wealthy pay such few taxes while owning million-dollar-producing real estate, this is how. In today’s episode, you’ll learn how to use cost segregation, too, so you can keep more money in your pocket.

Taxes aren’t everyone’s favorite subject, but paying fewer taxes? You can probably get behind that. We’ve brought on CPA and CFP Mitchell Baldridge to explain how he helps real estate investors, large and small, delete their taxable income and build their real estate portfolios faster. Our own Rob Abasolo uses Mitchell’s team to cut his taxes down by more than six figures!

In this episode, we’ll explain what cost segregation is, why so many top real estate investors use it to lower their taxes, when you can (and can’t) use it on your properties, the short-term rental tax “loophole” to take advantage of, AND what happens when you do it wrong.

In This Episode We Cover:

How to wipe out your income taxes using cost segregation studies

Bonus depreciation and writing off your property faster than before

Using real estate losses to lower your W2 or business income

The short-term rental “loophole” ANYONE can use to reduce their taxable income

Carrying over losses and why top real estate investors will NEVER stop buying property

Caveats and pitfalls of cost segregation and when it can come back to bite you

And So Much More!

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