The Passive Income MD Podcast #271 Depreciation 101: The Tax Benefit You Need to Understand Before Investing
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Jul 7, 2025 Discover the power of depreciation in real estate investing! Learn how high-income earners, especially physicians, can leverage this tax strategy to dramatically reduce their tax burden. The discussion walks through essential concepts like cost segregation and bonus depreciation, emphasizing their potential to enhance financial freedom. Real-world examples illustrate how to navigate tax deferrals and avoid common pitfalls. Whether you're a novice or seasoned investor, this knowledge could transform your earning potential!
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Depreciation Creates Paper Loss
- Depreciation lets you deduct a paper loss from your rental building's value over 27.5 years.
- This lowers your taxable income without spending extra money, reducing taxes on passive rents and income.
Depreciation Offsets Passive Income
- Depreciation can produce paper losses that offset passive investment income.
- This reduces taxable income even while earning positive cash flow from rent and distributions.
Accelerate Depreciation Deductions
- Use cost segregation to depreciate building components faster than 27.5 years.
- Take advantage of bonus depreciation to accelerate deductions in year one if available.