Wealthy Way How the Wealthy Use Depreciation to Legally Pay Less Taxes
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May 31, 2025 Dive into the intriguing world of depreciation beyond cars! Discover how real estate investors turn IRS guidelines into substantial tax write-offs. Learn about various depreciation schedules and the distinction between long-term and short-term rentals. Explore the short-term rental loophole and how employed individuals can benefit by qualifying as real estate professionals. Finally, unpack essential strategies to navigate the complexities of tax deductions while maximizing the benefits of rental property ownership.
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Avoid Owning Property in S-Corp
- Avoid owning property in an S-corp as it is not beneficial for real estate holdings.
- Review your ownership structure and depreciation history early to optimize tax benefits.
Depreciation Explained Simply
- Depreciation spreads the cost of an asset over multiple years as the IRS expects assets to deteriorate over time.
- Real estate uniquely tends to appreciate but still qualifies for depreciation due to building wear and tear.
Use Correct Depreciation Schedules
- Use the IRS depreciation schedules: cars over 5 years, commercial real estate 39 years, residential real estate 27.5 years.
- Apply business use percentage when an asset is used partially for personal reasons.