331. The Overlooked Tax Move that Could Save You Tens of Thousands
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Jun 11, 2025
Discover the powerful tax strategy of Partial Asset Dispositions (PADs) that can lead to significant savings for real estate investors. Learn when and how to claim PADs on your tax return and use cost segregation studies to maximize benefits. Real-life case studies showcase potential savings, including a remarkable $2 million example. Understand the difference between passive and non-passive losses, and uncover missed opportunities in your depreciation schedule to ensure you’re not leaving money on the table.
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What Is Partial Asset Disposition
A partial asset disposition (PAD) lets real estate investors deduct the undepreciated basis of replaced property parts in the year of replacement.
This accelerates deductions by writing off remaining value of disposed components like roofs or HVAC systems immediately.
question_answer ANECDOTE
Roof Replacement Example
For example, replacing a roof in 2025 with a remaining basis of $8,000 can be fully written off immediately.
The new roof's cost is capitalized and depreciated, while the old roof's remaining basis is accelerated as a loss.
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Key PAD Claiming Tips
Use cost segregation studies to reasonably estimate retired components' costs for partial asset dispositions.
Claim PAD deductions in the year the asset component is disposed, typically on your tax return for that year.
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In this week’s episode of the Tax Smart REI Podcast, Thomas Castelli and Ryan Carriere, CPA, dive deep into Partial Asset Dispositions (PADs), a powerful but often overlooked tax strategy that can unlock substantial savings for real estate investors during renovations.
Key topics covered:
- What a partial asset disposition (PAD) is and how it works
- When and how to claim a PAD on your tax return
- Using cost segregation studies to support PAD calculations
- Real-life case studies, including one client who saved over $2 million
- When PAD losses are passive vs. non-passive
- Why traditional CPAs rarely take advantage of this strategy
- How to spot missed PAD opportunities in your depreciation schedule
Plus, Thomas and Ryan explain which types of renovations typically qualify and how to make sure your CPA isn’t leaving valuable deductions on the table.
To become a client, request a consultation from Hall CPA, PLLC at go.therealestatecpa.com/3KSEev6
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