Real Estate Rookie Avoid Paying Taxes (Legally) with THIS Rental Tax Loophole
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Feb 10, 2025 Sean Graham, a Certified Public Accountant and real estate investor, shares his expertise on tax strategies for rental properties. He reveals how to leverage the short-term rental tax loophole to save thousands on taxes, even for small investors. Sean explains the benefits of cost segregation studies, allowing for accelerated depreciation and immediate tax relief. He also covers how these strategies can help offset active income, including W2 wages, demonstrating that effective tax planning is accessible to everyone.
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Depreciation Explained
- The IRS uses depreciation to incentivize real estate investment, allowing investors to deduct a "phantom expense".
- This lowers taxable income without impacting cash flow, encouraging further investment.
Cost Segregation for Rookies
- Even small-scale investors or those with only one property can take advantage of a cost segregation study.
- Sean Graham house hacked a three-unit building and used cost segregation to offset his profits.
Offsetting Active Income
- Depreciation from cost segregation studies can offset active income like W-2 wages under two conditions.
- Meet real estate professional status (750+ hours) or utilize the short-term rental loophole (7 days or less average stay).