BiggerPockets Real Estate Podcast - 846: What You Need to Do NOW to Pay Fewer Taxes in 2024

Episode Date: November 20, 2023

If you want to pay fewer taxes or outright avoid taxes in 2024, you’re in the right place. We’re about to give you all the last-chance tax tips and loopholes you can use NOW to pay WAY less in taxes in 2024. All of these are perfectly legal, but many will require some form of real estate investing. Don’t own any rental property yet? Not a problem! You can STILL start planning to pay lower taxes BEFORE you buy! We brought back our two favorite tax experts, Amanda Han and Matt MacFarland, on to the show to share all the last-minute tax tips YOU can use to pay Uncle Sam less and keep more in your pocket. Plus, Amanda and Matt share a tax “loophole” that anyone who makes under $100K per year OR owns a short-term rental property can use to save thousands, if not tens of thousands, in taxes. We’ll also get into common ways anyone can reduce their taxes through retirement account contributions, charitable donations, and more. Plus, the common misconception costing you thousands of dollars in write-offs that you never knew you could take! In This Episode We Cover The one rental property “loophole” that allows you to take a MASSIVE deduction A huge real estate write-off any investor who makes under $100K is able to take  Retirement investing and how boosting your nest egg can dramatically lower your taxes Common real estate write-offs that you’ve probably missed  How to use your home equity for tax-free income AND a big tax write-off  What to do RIGHT NOW to avoid paying taxes in 2024 (and beyond!) And So Much More! Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-846 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets podcast show 846. Today we're talking about what you can do in the last 30 to 90 days of the year to impact 2023 taxes and get your financial house in order for a better 2024. And today, on loan from our sister's show, Bigger Pockets Money, Mindy Jensen is joining as my co-host today. Rob, I am so excited to be filling David's shoes today so that he can take a day off and work on filling out his beard. Well, right. I know. It's getting a little out of control.

Whether you just had a major tax bill due or you're new to real estate, can you still impact how much you're going to pay to Uncle Sam this year? Well, we are here to share some ideas for how you can pay less this year and set yourself up to save more next year. And that's what we do every single week on the Bigger Pockets podcast. We bring you stories, how-toes, and answers you need in order to make smart real estate decisions now in today's market. By the way, in today's show, you're going to hear how you can write off your pro membership. Right. That's just a tip. That's just a tip. Not a quick tip, but it's a good one. It's an extra quick tip. Welcome to the show, Amanda and Matt. How are you doing? Great. Thanks for having.

It's Rob and David. I mean, Mindy. I know we look a lot of like, so it is hard to get that a lot. How's everyone doing? Awesome. You know, I think contrary to popular belief, a lot of people who see us nowadays they're thinking this is our slow season. But actually for people like us who focus heavily on tax planning, this is actually a pretty busy time for us. So we're really excited to be here and kind of share all the tips and tricks on what investors can do to protect their hard earned money. You said the P word, tax planning.

I guess that's the T.P word, the different TP word. I think that's really important to note that your tax professional, can help you plan for saving this money, but they can't help you plan for 2023 at the end of 2023. They're helping plan for next year. So the best time to talk to your tax professional is now for next year's taxes. The best time to talk about 2023's taxes was last year at the end of this. I was going to say a year ago?

A year ago. Yeah, just about a year ago. Because there are things that you need to be doing during the course of the year. as Amanda and Matt will share because they're the tax pros, not me. That's true. That's true. Taxes are a very interesting game of dominoes and chess mixed together. It's the 4D chess, as they say. And Amanda, Matt, you're going to give us an overview of areas that listeners can still make changes to you in 2023 to improve their tax situation. So I believe today we're going to be talking about things like retirement accounts, HSA accounts, withholdings, charitable donations, real estate deductions, including one that I've never heard of. We'll also get into how you can stay in good standing with your tax team.

I have a bit of rant on this one and best practices in the industry to help make tax time less stressful. Amanda, why is this important? And is it too late to change anything in 2023? I know I said that the best time to plan for 2023 was the end of last year. There are still things we can do this year. What are some of the things that our listeners can do to help fix their 2023? tax situation. Well, I think, you know, if you're a listener who has already been doing tax planning, you know, starting with earlier this year, let's say in January, 2023, then you're probably

ahead of, I don't know, 90% of investors that we meet. So the reality is most investors have not done appropriate planning this year. And if you fall within that, you know, large number of people who haven't done it, your in planning is sort of like the last ditch effort on making sure you could still do certain things before year-end to have the right fax to pay less taxes next year. Effectively, where your numbers fall on December 31st determines how much taxes you will pay or save by next April. Yeah, I mean, there's still a few things you could do next year to impact 20-23 taxes, but obviously there's a lot more you can do between now and your end, a lot more options you would have to put in place now versus obviously waiting until after year-end for sure.

Yeah, I think we talk a lot during the year about an example might be how do we pay our kids and take a tax deduction for it. So inevitably, sometime, you know, in early next year, somebody will say, hey, I heard you on a podcast where you said to pay my kids and I really want to do that now for last year. Well, guess what? It's too late in 2024 to pay your kids for 2023. But right now, it's not too late to pay your kids for 2023 as long as all of that is done correctly before the end of the year. So that's just one of many examples of what else we can consider in the next, you know, like Rob said, 30 to 60 days to still get some pretty massive tax savings. Well, I'm excited to dive into that.

But before we do, we're going to take a quick break. Did you know your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action, the footsteps, the late night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be. contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport while your staircase

at home is fully capable of sending your income upwards. Here's the twist. You can go on a trip and actually earn money. Airbnb makes that possible with the co-host network. If you're away for a while or have a secondary property, you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications. It can manage reservations and keep things running smoothly so you don't have to check your phone between beach days. That means less stress and more time enjoying your trip. You can relax, knowing guests are taking care of and your place is in good hands. You travel, your house works. Everyone wins. If you're ready to host but could use some help, find a co-host at Airbnb.com slash host. Most investors spend more time

chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of these smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways, and seasonal wear and tear can increase the likelihood of claims. And traditional insurance companies aren't always built to handle these claims quickly or smoothly. That's why more real estate investors are turning to steadily. They focus exclusively on landlords, whether it's a single-family rental, a burr builder's risk policy, or midterm holiday guests. You get fast quotes, flexible coverage, and protection for property damage, liability, and even loss of rental income. Now is the perfect time to review your rates and coverage.

Get a quote in minutes at biggerpockets.com slash landlord insurance. Steadily, landlord insurance designed for the modern investor. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Funrise Flagship Fund. Now, you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features $4,700, a single-family rental homes spread across the booming sunbelt.

They also have 3.3 million square feet of highly sought after industrial facilities, thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical returns, and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise flagship fund before investing.

This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. Okay, and we're back with Amanda Hahn and Matt McFarland. Let's get into a few things that you mentioned on that list. What are some things that listeners should be doing with the retirement accounts and HSAs before the end of the year? Matt, I'll start with you. Yeah, I mean, I think one of the things they first and foremost they should be doing is definitely talk with their tax advisor about which, how the year's going and what type of retirement account is going to be best for their business or their activities, right? So it's not one size fits all.

There's obviously loads of different kinds of retirement accounts. But, you know, you want to figure out which one is going to be the best for your situation. You know, how much income did you make this year? Do you have any employees? How much are you wanting to contribute? What's your tax liability going to be? All those good questions because some of the retirement accounts may need to be set up before year end. And some of them may actually not have to be set up by year end and not even funded until next year for this year.

So it's going to depend on everyone's kind of personal goals for sure. Yeah. If you're someone who had active real estate income or I guess income of all sorts, but we're talking specifically to people in real estate. So for example, if you had a lot of wholesale income, fix and flip income or just like real commission, there are generally really great ways for you to maximize your tax savings by putting money towards retirement account. And so one way to look at it is, you know, if I had $60,000, would I rather pay that to the IRS or would I rather redirect that money towards saving for my own retirement? And if I put it towards retirement account, not only do I get a tax deduction

for it, but I could also potentially use it to invest in real estate as well through like a self-directed investing avenue. Yeah, okay. So what is the, is $60,000 like the max that you can contribute to your retirement account? Or how exactly does that work? Yeah, it's around that number. It's a combined number between, you know, what you can do as an employee and what your employer can do when you put them two together.

Now, that's for like defined, they call it defined contribution plans like a 401K. If somebody is kind of fits the right profile, even, there's even options like a defined benefit plan that, you know, we've seen, don't have those limits where I've, you know, we've seen people put $150,000, $200,000 into it every year. So yeah, there's definitely different types of plans, different limits. But yeah, to your answer your question, that's, that's around what it is for those 401K type plans. I think this, the max this year is about $66,000 in the 401K. And then the defined benefit plan, Matt is talking about, could be added on top of that, too. So it's not one or the other. A lot of our clients looking are able to do both of those together. Oh, okay. And Mindy, is this

something that you're doing as well? Yes, but I didn't have that defined benefit plan, so now I have to go talk to my guy. But I have a self-directed solo 401K. So I am a little bit older than probably some of the people that are listening to this show. I have a lot of 401Ks from past jobs. And every time I left my job, I would just roll it over into an IRA. And when I became self-employed. I'm a real estate agent, so therefore I am self-employed, 1099. And you have to have self-employment income to have a self-directed solo 401K. I gathered up all of my IRAs. I rolled them into my 401k plan. And now I can use that pot of money to invest in real estate. I can use it to invest in the stock market. I can use it to make loans to other real estate investors, private loans. I can

use it for a lot of things. There are a few things I can't use it to invest in weird, collectible things like cars, and I think paintings and wine conveniently. None of the things I want to invest in anyway. So it works out really well. I want to invest in real estate, the stock market, and make private loans. So it works out perfect. But what I do is I funnel all of my real estate agent income into that account. That is 100% tax-free because it's going there before I pay any taxes on it. And then my company matches my up to 25% of my income. So I think the contribution limits this year are 22,500 if you're under 50. You get an extra 6,000 if you're over 50, which I am. So now I've got 28,500 in that account, plus 25% of that on top of that that my company

matched. So that is the amount of money that goes in there right off the top of my income. My husband is under the same rules. So he also has a self-directed solo 401k. So every year we can legally, I don't want to say legally redirect, but legally redirect money that would have been taxed to this non-taxed account of, I didn't do the math really quickly. 28 and 28 is like 50 something plus. 56.

Yeah, plus 25% on top of that. I mean like 60, 70,000, the first 60 or 70,000 dollars coming in, we're paying no taxes on. Dang, okay. And the reason we're able to do this is because we have other sources of income and other buckets that we can pull from to live off of. But, you know, there are, and again, you don't know what you don't know. So if you are doing your own taxes because you want to save the $300 at costs or whatever, you could be shooting yourself in the foot and not having all of these extra benefits because you didn't know about it. Who reads the tax code? People like Amanda and Matt read the tax code.

That's what you're paying for. Well, you don't brush up every night before bed? No, I do not. I've got a 7,000 page booklet, and I'm currently on page three. It helps you. It helps you go to sleep faster for sure. It's a genius podcast idea, just you reading the tax code and you go to sleep to that. I think what's really interesting is that, you know, in your scenario, Mindy, because your spouse is also self-employed or has other

active income outside of a W2, effectively you guys can double up on all those things. Right. So you're doubling up on the solo 401k right now. If you decide to get into a defined benefit plan where we're doing more than the 66,000, you can double up too. So I mean, we have clients who are able to write off, you know, $400,000 or more against their taxable income. And what I love about it is in the self-directed arena. Once the money is in there, we also get to invest that in real estate and have it grow tax deferred, whether it's a rental property or you wanted to do hard money lending to, you know, some of Rob's fix and flip deals or something. It's really a really amazing way to save taxes today as well as having tax deferred money growing for you, too.

So you've used the phrase defined benefit plan a couple of times. Can you explain what that means to our listeners? Yeah, it's kind of more like a, I'm going to say, like a supercharged retirement account. So it's, you know, where like a 401K, they call it like I was saying, a defined contributions. So they tell you how much you put in and it'll grow based on higher performances. A defined benefit is actually kind of flip-flop where they say, here's the amount of benefit that it's going to be calculated at retirement age and they back into how much you're allowed to contribute, like actuarial calculations.

So that's why it works really well for people who are in their 50s or 60s who are getting close to retirement age because it allows you to put a lot more in because you have less years to get to that defined benefit amount. They do with these calculations on. So that's where it comes. really be powerful, especially if you have no other employees or if you do have employees, they're really young, like they're in their 20s or something, because then you know, you wouldn't have to contribute very much for them because it's 40 years of retirement or

something. We've seen that. I mean, yeah, the older you are typically the higher dollar amount you can put in currently. We've seen it as, you know, as young as like 40s. But anyone under under 40, like in their 30s, it has to be pretty extraordinary circumstances where it could make sense. So you could still do it. It's just that, you know, the older and age, the more you can put in per year. What I also love about a lot of these retirement contributions, since we're talking about year-end, right, is that for the most part, a lot of this money does not have to go in before the end of the year.

You have until the date you file the 2023 tax returns to contribute. So, you know, if you're in a sole proprietorship, you have maybe as late as October 15th of 2024 to actually put the money in. if you have a corporation, you might have until next September to put the money. And so it allows us to have more time with our money, but still be able to count on that deduction up front. Yeah, but I think the key is you have more time to contribute, but the key is to understand what are your numbers going to look like for this year, right? So you need to know, as you're kind of up on your end, like how much taxable income

are going to have? Is it going to be $800,000? Is it going to be $500? Because if you think it's $800 and you're not planning on this contribution, maybe you're going out and buying more real estate, which isn't a bad thing, but maybe you've spent more more money than maybe you needed to, you know, if that makes sense, right? So that's why it's important to kind of get an idea of where 2023 looks like before kind of making some of these decisions.

Sure. Sure. Well, can we talk a little bit about charitable donations? Because I see this one being like a, I feel like I see a TikTok on this like every single day. But how does that actually work? If you donate to some kind of charitable organization, are you deducting, you're not getting necessarily like a credit on your taxes.

Is it still just like a typical write-off, right? Or is, am I missing how that works? Yeah, exactly. So charitable donations, if you donate something that's worth $100 is going to, you know, reduce your taxable income by $100. It doesn't mean you're going to save $100 in actual tax, right? Because our tax savings is going to be the write-off multiplied by your tax rate. So, I mean, in most charitable planning strategies,

our leading indicator does have to be an investor or a taxpayer who is charitable minded because at the end of the day, we are giving away things to charity. But I think a lot of our more higher net worth clients who really just don't need the cash flow from the rentals to live off of immediately. There are structures we set up where they put a property into a charitable trust. And what they're doing is they're pledging that they will donate the cash flow into the various charities to get an immediate deduction up front. But the benefit is at the end of the trust terms, let's say it's a five year or a 10 year trust, the real estate comes back to the investor. And that's what a lot of our investors like, right? If they're not needing the cash flow to live

off of, they were going to donate it anyways over the next five, 10 years. Why not get a huge upfront deduction if at the end of all this, we get the real estate back anyways in our name or in our beneficiary's name. Got it. So you're saying you have to be charitably minded in general because you're still spending the money and the tax benefit is like, you know, it's the same as other deductions. So for example, when people are just like, oh, I need a write-offs, I'm just going to buy this to write it off. And it's like, well, you're still spending the money. So you should really only buy things as a write-off, quote-unquote, if you actually need it. Otherwise, you're just buying things for no reason. Does that make sense? Yeah, that's that shit's creek.

That's exactly what I'm talking about. It's like, it's a right-off. Yeah. And it's like, well, yeah, tech, I guess, I guess so. Who's paying for that? It's, who cares? Somebody's paying for it. And so just to spell the charitable donation part of it out a little bit more, can you highlight how these can help get your taxable income down from a tactical standpoint? Yeah, I mean, it's a great question. So a lot of times that charitable lead trust that Amanda was talking about is a great strategy when, you know, clients are, you know, we obviously have a lot of clients who are real estate investors and sometimes they can, you know, reduce taxable income a lot or with their real estate.

And sometimes it's not enough. So other times we'll look at, okay, what are some other things we can do? and maybe charitable gifting and strategies come to play. Another big one is a donor advised fund. That's another kind of an easy, it's an easy thing that everybody can go to, you know, I don't know, any brokerage house fidelity vanguard, a big one, set one up in like five minutes. It's a way that you can put money into one of these accounts and take a tax deduction now, but not necessarily have to fund the actual charities of your choice for overtime.

So I guess the example where that might work would be, you know, maybe your stuff. somebody that I donate $50,000 a year to my church every year for the next five years. I know I'm going to give away $250, but I happen to have the money now and I need the deduction now because maybe I had a higher income year than I usually do. But I don't necessarily want the church to get all the money right now. So you can put it in this fund, this donor advised fund. You'll get the deduction this year and then the fund will spread. You know, you can tell the fund every year, give $50,000 to, you know, my church. So that's one way we see that work really well. But it's, you know, it's definitely a way to bring down your taxable income, again, depending on your

tax bracket could save you 30, 40, 50 cents on the dollar. It's funny, I think, how we started out our conversation here with some of the more advanced strategies that Matt and I work with clients on that are very high net worth, very high income. But the reality is a lot of our clients are newer investors who are not making $500,000 or $1 million a year. And also even for those people who are, if they're heavily involved in real estate, odds are they don't have a huge tax liability to begin with to even need this defined benefit or charitable donation, right? So a lot of the clients we work with are able to use real estate naturally to offset their taxes through depreciation, through real estate professional, or through the short-term rental loophole. And for us, when we do

in planning, that's typically where we begin. We say, hey, let's look at your real estate. How can we maximize the tax savings from your real estate? And if that's enough, that gets us down to 10% or zero taxes, then we're done, right? Our job is done. It's easy. But if we can't get it down to an acceptable amount, then we look at all these very advanced charitable planning, defined benefit to get to where we want to be, basically. Okay. Well, we've teased about real estate and that kind of is what the Bigger Pockets Real Estate podcast is all about. So what are some ways that real estate can help offset your taxes? Well, yeah. I mean, obviously, as I've mentioned, I think probably 80, 90% of our clients invest in real estate, you know, for those who don't know, like,

And it runs a gamut. It's people doing full-time real estate to the other extreme where they're working the W-2 job and investing on the side like Amanda was mentioning, right? So first and foremost, I think real estate obviously, you know, a lot of times I think people have kind of a, I don't know, a tunnel vision on real estate. They'll hear somebody say, well, I make too much money so the real estate is not helping me. But keep in mind, obviously, when we're investing in rental real estate, you know, if you've got deductions, you know, you're taking that you couldn't deduct before, or you've got depreciation offset. We're offsetting the cash flow first and foremost, right? So the goal would be, hey, if I made $10,000 to cash flow on his rental property, but I'm not paying any taxes on it because I've got depreciation,

that's a win right out of the gate, right? Because that's $10,000 in your pocket that you don't have to pay taxes on. And then from there, it's like, okay, what else can we do to look for ways to offset W2 income or other business income, whatever somebody else might have? I mean, I feel like the most people, and I mean, I'm sure we'll get into some of these actual strategies here in a second. But, I mean, when you look at just the general deductions, right? like, or sorry, the general depreciation, obviously that's a straight line depreciation that can lower

your taxes and does have obviously a bit of an impact on everything. But once you start using some of these bigger cost segregation, bonus depreciation plays, I feel like that's where you really start unlocking a lot of the tax benefits of real estate. Is that something that you're typically pushing clients towards or is that really only reserved for some of the more higher level real estate investors? Yeah, that's a great question, you know. Well, first I will say that, Cost segregation is probably one of the most impactful tax strategy within the tool belt. So that's one that all investors should understand and use at some point in time. And I say some point in time because cost segregation is not ideal for everyone.

We have unfortunately seen clients who do cost segregation prematurely where it ends up hurting them. I was actually even talking to another CPA who doesn't do taxes, but they decide to do their on cost segregation. I was talking to them about how that actually hurt them in the long run. But yeah, if you're doing things correctly and you understand that you're able to utilize accelerated depreciation through cost segregation, then it's definitely really, really powerful. I think there's a common misconception that cost segregation is expensive. It's only limited to large properties like commercial real estate, multifamily, when it's in fact not true. We have a lot of clients, actually the majority of our clients who do cost segregation are

people who just own portfolios of single family homes, whether it's long-term rentals or using the short-term rental loophole. That's really by far where we see most of the people using cost segregation. And especially today with kind of the ability to do a lot of these studies remotely, the cost of getting a cost segregation done has gone down a lot. And with bonus depreciation, you know, this year we have 80% bonus. The benefit has increased a lot. So we're looking at much figure increase in benefit, a much lower cost, which is what makes it more feasible for many investors than it ever has been in the past. We were joking about this before the podcast, how cost segregation is the eighth wonder of the world. Although I think we might have said

ninth because there might be an eighth one of the world that a lot of people don't know about. Apparently, I'm the only one who knows about it. But yeah. Yeah. You know, it's such a powerful tool, but we kind of went right into this topic. Do you think one of you could, Matt, maybe you could tell us what is cost segregation for everyone at home so they understand the general premise of it. Yeah, I mean, you know, kind of cost seg is kind of supercharging real estate depreciation, right? So, you know, big picture when, you know, a lot of people may know this, but when you buy rental real estate, we get to take a ride off every year for a certain amount against our income, you know, because in the IRS eyes, you get to take a deduction like for normal wear and tear.

So we call this like a paper write off because depreciation is based on a part of your purchase but it's not necessarily money you're spending every year, right? So that's great by itself. They give you, as you were mentioning, I think residential properties, you can write off over 27 and a half years, straight line, commercial properties are 39 years. So that by itself is good. But then when you add kind of you supercharged with COSEC,

what they're doing is you're getting a study done from like an engineering study. Somebody goes in and looks at the building and says, hey, instead of this building being written off over 27.5 years, there are certain components, certain parts of it that are more like personal property or we call land improvements, things that are either five-year assets or 15-year assets. So it allows you to take a portion of that and say that should be written off over five years or 15, again, which is great because now we're taking more depreciation sooner. And then when you add that layer of bonus depreciation on it on top of it that you were talking about,

those five-and-fifteen-year assets, we can write off 80% of it right away instead of over five-and-15 years. So it just kind of, it's a way to take a lot more of our depreciation expense up front. Same amount over the life of the asset, but why not take more of it? front if we can use it and benefit from it and use that savings to kind of, you know, reinvest go out and buy more income producing assets, right? You know, I'm really happy right now because you said all of that and I understood it perfectly, like the back of my hand because I've been studying this stuff so much over the last year. And it really is, I think, that the thing that most real estate investors should be most brushed

up on, especially if you're a short-term rental investor because, you know, there are ways to get it to access this benefit a little bit more if you're materially participating in the management of your short-term rental. There are seven ways to do that. But if you are, you know, most of the time if you're self-managing your short-term rental and you're spending more time in that business than most other people, or than all other people in your business, then you're able to use this benefit. And it can really skyrocket your ROI. A lot of people are looking at the cash on cash metric with their rental properties, but they're not looking at the total ROI of it. And the tax component of real estate is what really explodes your ROI, I think, on any given

investment. it. Yeah, I mean, the short-term rental loophole is probably one of our favorites. I mean, short-term rental has been around for many, many years, right? So it's a strategy that we've been using with clients for a long time. But I think it kind of became more mainstream in the last maybe three years or so. But it works really well for people who are high-income earners. So that income could be from a W-2 job or a non-real estate business, where real estate investing is sort of just your side hustle, right? So I'm working as a doctor. or attorney or an IT guy making a lot of high W2 income.

Historically, we're not able to use rental losses to offset all that income because of these wacky passive loss rules. And so the short-term rental loophole really is a way that allows people to continue working full-time in their profession, but with short-term investments on the side where they're spending the right amount of hours, doing the right things for their short-term rentals, and really be able to create some massive tax savings. We have people making like $300,000 a year of income and paying little to no taxes using that exact loophole. I have no words because I'm so, I'm struck dumb by this loophole.

How does this loophole work? Please explain more about this loophole because I want to do that. I want to pay no taxes. Can I try? Yeah, please. Can I try? And then the tax people can tell me if I'm right or wrong. So ordinarily to be able to reap the benefits of cost.

segregation and bonus depreciation in general. You have to be a real estate professional, meaning you have to work 750 hours a year in a real estate business, and it has to make up more than half of your time. So this has made it very difficult for people in the real estate industry, you know, like they said, who work with W2 or anything like that to reap this reward because they don't spend more than half their time in real estate. They're doing their full-time nine to five job, which is usually about 2,000 hours a year. The short-term loophole really blows this thing up because it now says that if you materially participate in the management of your short-term rental, that's like the official terminology. Again, there are seven ways to do this,

but basically very simplistic and oversimplified way of saying this is if you work 100 hours on a short-term rental, meaning two hours a week, and you work more than anyone else within that short-term rental, right? So you're working more hours than your cleaner than your landscaper and everybody. then you are now able to circumvent the real estate professional status and now use cost segregation to your benefit, who I'm getting sweaty just talking about this because I see the lawsuits forming. But was I mostly correct there, Amanda and Matt? Yeah. Yeah, that's pretty, that's pretty correct.

Yeah, I mean, the idea is that we're trying to create, with this depreciationation, we're trying to create losses on paper. Again, we don't want you to lose money on your real estate, but if you, the appreciation is more than your net income, Now we've got a loss of rentals, and specifically short-term rental in this example, how can we use that loss to offset W-2 and other income? And if you can meet one of those tests that Rob was referring to, now we can use that loss that's created from the cost seg and use that to offset W-2 income of $3,000 or $400,000 and Amanda was referencing, right?

Yeah, and if the short-term rental loophole is new to you, like this is the first time you're hearing about it, we actually created... Mindy shaking her head, yes. We actually created a... a whole downloadable resource just on the short-term rental loophole. So you can just go to our website at keystonecpa.com to download it. And it kind of has all the details of it. My second comment is, Rob, are you open to working for Keystone CPA as a tax advisor?

Because you're amazing. I don't know if I qualify. He can talk and he knows taxes. Yeah. So he just a lot back too. We got as to our car bag. No poaching, Amanda. That's right.

Oh, sorry, Baker Pocket. Sorry. Edit that out. Edit that part out. It's all of our duty as real estate investors to understand this stuff because it's not what you make. It's what you keep, right? That's the rule at the end of the day.

So if anybody, if you want more context on this, we did an episode with Mitchell Baldridge on the Bigger Pockets podcast a couple of weeks ago or a couple months ago. Go check that out. It dives all completely into cost segregation. Episode 823. So be sure to go and check that out. Did you know your house gets bored when you leave? I can't actually prove.

that, but it probably misses out on the action, the footsteps, the late-night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport while your staircase at home is fully capable of sending your income upwards. Here's the twist. You can go on a trip and actually earn money. Airbnb makes that possible with the co-host network.

If you're away for a while or have a secondary property, you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications, it can manage reservations and keep things running smoothly

so you don't have to check your phone between beach days. That means less stress and more time enjoying your trip. You can relax, knowing guests are taken care of and your place is in good hands. You travel.

your house works. Everyone wins. If you're ready to host but could use some help, find a co-host at Airbnb.com slash host. Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of these smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways, and seasonal wear and tear can increase the likelihood of claims. And traditional insurance companies aren't always built to handle these claims quickly or smoothly. That's why more real estate investors are turning to steadily. They focus exclusively on landlords,

whether it's a single-family rental, a burr-builder risk policy, or mid-term holiday guests. You get fast quotes, flexible coverage, and protection for property damage, liability, and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in minutes at biggerpockets.com slash landlord insurance.

Steadily, for the modern investor. For decades, real estate has been a cornerstone of the world's largest portfolios, but it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 a single-family rental homes spread across the booming

sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities, thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical returns, and start investing in just minutes.

Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund. This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. All right, rental property investors, listen up. Our friends at Dominion Financial already have some of the best DSCR rates in the industry. Now, they're the fastest, too.

They just launched 10-day DSCR closing. That's right, 10 days. And they're still the only lender with the DSCR price beat guarantee. That means faster closing. The best terms. Zero guesswork. That's Dominion Financial. Check them out at biggerpockets.com slash dominion. Again, that's biggerpockets.com slash dominion. But that's really just one of the strategies that we're here to talk about today. We've also got other good stuff in the works here like 1031. Can you tell us how that sort of can impact your taxes as well? Yeah, I mean, you know,

the market has been interesting to say the least in real estate. And so in the last two years, we just had a lot of clients really analyze their portfolio and try to figure out, you know, is this specific property one that I would like to keep in the long term or are there ways for me to kind of reposition my equity and money into other, you know, bigger, better deals? And one of the ways to do that without paying a lot in taxes is using the 1031 exchange strategy. And this, you know, is only exclusively for real estate. Like we can't sell stock and 1031 exchange into another stock. But we certainly could do that with real estate. It's sort of like playing monopoly, right? You buy a couple greenhouses traded up to a red hotel. And so when we do that in the real world, what happens is that we get to defer any capital gains taxes that we would otherwise pay. So instead of sell real estate, pay taxes, reinvest the rest, what we're able to do is sell real estate, reinvest everything that we've made into this next bigger and better property, provided that we follow these 1031 exchange rule. So this is one that say that many or most of our clients look at and really is an amazing way to build lifetime wealth through real estate and sometimes even generational wealth through real estate too. Yeah, I mean, you think about it, you're getting to almost kick the can down the road, right?

So we have a lot of clients who will sell property one, buy property two, hold that for five years, sell that one in a 1031 exchange and kind of just rinse and repeat over 30, 40 years. and never paying taxes until down the road. And, you know, if everything works out and they pass away, still owning the real estate, then, you know, it goes to their errors totally income tax-free, right? So it is a powerful strategy to kind of eliminate that tax drag that Amanda was referring to from having to pay tax now and reinvesting the net and all that good stuff, right? Yeah, the 1031 is the action you want to take with the advice of your tax professional before you even list the house on the market.

You want to get all of the information because we've kind of glossed over what you have to do. There are very specific timelines, very specific rules. It's a government program. Of course, there are very specific rules. And if you miss a deadline, you miss a date, you don't cross your tea or dot your eye, the whole thing's out the window. And all of that sweet tax savings that Matt was just talking about is now your tax obligation. So let's say that I had a 1031 and I didn't do all the things I just told myself I was supposed to do.

I didn't call up Amanda Hahn and say, hey, Amanda, help me through this. Instead, I said, Amanda, I just sold my house and I want to do a 1031. And she says, you are hosed because you didn't call me beforehand. Do I have any recourse? Is there anything I can do with that? For sure. And I mean, to your point, Mindy, I think taking a step back to the same thing we're talking about earlier, right, a 1031, exchange isn't necessarily for everybody, right? So it needs to be something to make sense in your

smart. Sometimes there's people that they jump the gun because they've heard about 1031 exchange. They go out and do one. It's like, hey, you actually, your tax liability on the sale was $1,000 or you actually had a loss on the sale. So you didn't even need to do it, right? So, I mean, that's oversimplifying things. But to your point, it's like, make sure it makes sense. Now, if somebody kind of goes through the process and figures out, hey, I didn't follow the the rules or I couldn't find my replacement property or what have you. Now, I'm sitting on this gain that I might be paying taxes on, there's definitely things people can do. I mean, one thing we kind of, you know, look at is, you know, look at, you know, especially coming

up on year end, I mean, now is a good time. For people who maybe have these kind of failed 1031 for a lack of better term, right? Maybe now is the time to look at, do you reinvest in somebody's syndication before your end that's going to go out and buy an apartment building that's going to do a cost sec. It's going to give you a K-1 with an expected loss. And you can use that loss to offset this gain from sale of the real estate. So it's, you know, We kind of, we jokingly refer to as like a lazy, lazy man's 1031, you know, where it's kind of get the similar benefit, but you just didn't, you know, kind of go through the hoops, I guess. Yeah, or maybe you just have other rentals that you've owned that you have not done a cost

segregation on or you didn't need to for some reason. Well, this is a good opportunity for you to do a cost aggregation on the rest of your portfolio because those losses that you generate typically can offset the gain on that failed or partially failed a 1031 exchange. So absolutely this is a big one that we are currently working with a lot of clients are. Again, because of the, you know, the kind of shift in the market, we had a lot of people who sold earlier in the year, but they just couldn't find the ideal replacement properties. And so now this is the time to do the homework and say, okay, what can we still do? What can we still buy? What can we still cost segregate until that we can

offset the gain that already incurred earlier this year? Sure. Sure. So we've got two more here in the buying category that I just want to quickly run through. I'll get. one to each of you. But Matt, can you tell us about the cash out strategy and how that could help with the whole tax preparation side of things? Yeah, I mean, you've got some equity built up in your rental properties and you're looking to tap into that and kind of use that to continue to build your portfolio. You can borrow against your rental property. If you reinvest it in other rental properties, that interest you're paying on that extra loan amount is now tax deductible against the new rentals. The cash amount that you took out from the previous rental, not taxable to you

right now because that's another loan, right? So it's a way to get additional cash into your portfolio, reinvest it and do it a tax-efficient manner. Awesome. And Amanda, what about syndications? Syndications. Gosh, you know, I love syndications for several reasons, right? One, it gives you the ability to leverage other people's knowledge and other people's credit or borrowing ability into to bigger and better deals that maybe me by myself am not able to access, right? We were talking about the tax benefits of depreciation, accelerate depreciation. Well, typically we're talking about that on a smaller scale, my single families, my duplexes, but the same exact concepts and strategies work at the syndication level.

And in fact, it works with little to no effort from me, right? Because it's the sponsors who are doing all of those strategies. And what I get is a nicely wrapped tax loss on the K1 that I hopefully get to use to offset either my passive income or maybe even some of my active income if I'm a real estate professional. So yeah, syndication investment is also really a big point that we look at for year end. Again, with a lot of our clients who had a really great year in real estate or in their business. And we're saying, hey, how can we just get more losses in the limited amount of time that we have? But again, like we keep saying, it's not a one-size-fits-all. So definitely make sure you work with your tax advisor.

We have seen clients who, you know, pour a lot of money into syndication is expecting to use these losses, where without that proper planning, they were actually limited in how much they were able to get in terms of benefits, too. Or often they just can't use the losses because they aren't a real estate professional, right? I feel like that happens relatively often where they hear about the, you know, the deduction, the losses like, great. And then they find out that they're not a real estate professional. they get mad at the syndicators for not making that super clear. So I've heard those stories often too. Yeah.

And I think, you know, just with everybody listening, your syndicator is not your tax advisor, right? Just like your attorney is probably not your tax advisor. Your barber is not your tax advisor. So we can all hear these great strategies. But before you implement, you just got to talk to your own tax advisor because that's who knows your situation. Yeah. I want to underline that.

Your syndicator is not your tax advisor. They might say things that sound tax advisory, but they're not going to pay your tax bill when their advice, their information doesn't actually pan out. So you need to get somebody who actually knows what they're talking about, which is why you pay a tax advisor. Okay, moving on. Let's quickly cover some of the tax strategies for when you're selling properties. What is this prepay early by one day business? Repay early by one day. So when we talk about year-end tax planning, one of the things we look at is the timing of things.

And so, you know, whether you're selling a property or not, right? Let's say I'm someone, I'm looking at a higher taxable income for my rentals or I was going to be able to use, you know, some of these losses from my real estate. One of the things to consider is prepaying our expenses. And so that means taking a look at what I expect to pay in rental-related expenses, January of next year and then prepaying those before the end of this year. It could be me paying by cash, paying by check, or even just charging it on my credit card. The significance of this is, let's say I had some marketing fees. I'm going to pay it December, if I was going to pay January of next year, that's a 2024 deduction. But if instead I paid it by December 31st of this year,

now it becomes a 2023 tax deduction. So even though I've only prepaid it by one day, I've accelerated that tax savings by 365 days. Wow. Okay. And can you, another one that that's, I feel like is worth noting is sort of like time of the year in which you sell the property. Can you just sort of talk about the difference between selling your property in December versus selling it in January? Because I feel like that all kind of goes hand in hand. Yeah. I think it actually works kind of really in the same format, right? So if you're in the process, you know, come December, you're looking at selling your property and it looks like it's going to close in the last week of the year and you're sitting on X amount of gain, you're going to pay taxes. If there's a way for you to kind of

push that sale so it doesn't close until January 2nd or 3rd, obviously not killing the deal, right? We're not trying to kill the deal. We're just trying to defer it maybe a week or so. But just by doing that, now all of a sudden you've pushed the tax, you know, tax liability back an entire year, which is good by itself. But then it also gives you another 365 days to plan for next year and find ways to longer time to offset that income versus. if it, you know, sold on December 27th and where it is for sure, a 2023 transaction. Yeah.

Yeah, I'll share an example with you guys. I know, you know, so far we're talking about the sale of real estate, but I can share an example where we had a client last year who was selling a business. So he was selling a medical business. It was closing, you know, in the fourth quarter. And he wasn't going to be a real estate professional because he was, you know, his business all year, not enough time to buy short-term rentals. And so one of the suggestions we said is let's close the deal.

early the following year. So now, fast forward to 2023, you know, he's got a lot of real estate now able to do real estate professional. So not only do we delay the capital gains tax on the business sale, but we also have all these great opportunities to offset it now that he is able to do real estate professional and has a much larger portfolio because he had the time to earn those hours. He had the time to build up the portfolio in that second year. So it could be really phenomenal. You know, we joke that it's only one day or two days. but it's a very big difference in terms of maybe hundreds of thousands of taxes or paying no taxes. And to Matt's point, you don't want to blow up the deal when they want to close in December and you want to close in January.

But if you are now giving yourself an entire year to find more deductions and consult with your tax professional to have more opportunities, you may want to incentivize your buyer to, push back the sale a little bit. Because honestly, what is it going to do to them to, you know, and they might be in a 1031 exchange where they have a tight timeline. But if there's any wiggle room at all, incentivize them in some way, I'll reduce the price. I'll let you put in a tenant early. I'll do, you know, what can work for you. And, you know, that's real estate works best when you can be creative with your solutions to help find a solution that everybody wins with. Yeah, completely agree. So we've covered buying, which we talked about, you know, the STR loophole. We talked about the 1031 Exchange, cash out syndications. We just covered selling, which is prepay early and then selling in

December versus January. Now when I get into owning real estate, Matt, do you think you could touch a little bit on the tax benefits of ownership when you're not a real estate pro? Yeah, I mean, I think, you know, obviously real estate investing, some people go into it, you know, not going to be full-time real estate investors, right? So they're, you know, from a tax planning perspective, they're not going to be able to a real estate professional or they work full-time and they can't convince their spouse who maybe doesn't work full-time to be a real estate professional

because that conversation comes up a lot too, right? But, yeah, if you're not going to be in that boat, I mean, I think real estate investing is still makes sense for an asset class for sure. As I was mentioned earlier, you know, first and foremost, we're looking for ways to offset that cash flow, right? So you're getting cash in your pocket, not paying any taxes. And then from that perspective, of other things you can do to look at saving taxes.

I mean, we talked about charitable gifting strategies earlier. That's a big one. Retirement planning can come into play. There's other alternative investments. Some of our higher income people who are not heavy in real estate look at doing oil and gas investing. So that can be a tax efficient investment as a way to reduce your taxable income as well. So there's different ways to kind of do it.

Yeah, I know, Rob, you mentioned real estate professional status. I think that's a common misconception that people think, that there is only a tax benefit for investors if you are a real estate professional. One that's not talked about a lot is actually for people who make $100,000 or less of income, you actually can use up to $25,000 of rental losses against that W-2 income, regardless of whether you're a real estate professional or not. And so for some of the people who are maybe starting out in their career or starting out in real estate, where they fall within that definition of $100,000 or less of income and they're investing in the

long-term rental space, it's entirely possible that all these strategies like write-offs and cost segregation could benefit you because that could save you a big chunk in taxes, right, for you able to use 25,000 of losses against that income. Yeah, and for those who are not real estate professionals, that's why that's so powerful, right, because we can use some of those retirement strategies, right, making contributions to retirement accounts are contributions to HSAs to bring that income down closer to $100,000 mark so we can use that maximum of $25,000 rental loss that's allowed for us. So there's definitely, again, the importance of tax planning, right? If you don't know what your numbers are, you're not making

the, making the moves you need to make before your end, now's the time to kind of figure out what those numbers look like. Yeah, totally. So we tested a little bit on write-offs. And a lot of people have heard about write-offs, but you can't write-off everything popular to what they say on Chitzkriek. it's a write-off. What is the guiding principle for what you can and can't write off on your taxes? Amanda, can you shed a little bit of light on this? Yeah, sure. The one thing that we suggest all investors to do is to practice asking yourself. When you're spending money on something, ask yourself whether this expense is ordinary and necessary to me as a real estate investor. And the answer to that question will differ person to person. It'll differ for a short-term

rental investor versus a long-term or mid-term investor. But the reason you want to do that is because then it helps you to understand whether you're spending money on the right things that will help better your business. And those are really the only two requirements that the IRS looks for, right? Ordinary. Is this ordinary for you as an investor and is it necessary? Is this expense necessary for you to carry on as a real estate investor? And if you don't know the answer to that, because let's face it, right, there are things that are kind of unclear, which is not sure if it is or is not. If you're unsure, that's what your tax advisor's job is, right? So call them up, send them a quick email and say, hey, I'm thinking about doing XYZ or I'm thinking about buying this.

How can this be a legitimate tax deduction? And the powerful word here is how, right? How puts both you and your advisor in a more creative space? So maybe the answer naturally is no, you can't write it off, but how can you do it well? If ABC were to happen, then this could potentially become a legitimate right off. what are some things that investors forget about when they are sharing expenses with their tax professional and not doing it themselves? Everything? What is some of the most common? Yeah, that's such a great question.

I think most investors, they don't forget about mortgage interests or property insurance or property taxes, right? That's the stuff that people remember. But it's more the kind of what we call like the overhead cost of being a real estate investors. So it's educational costs, dues you're paying, professional dues, travel costs to go to conferences, mileage is going back and forth to look at properties, meet with a real estate agent, business meals, right? Home office deductions, another big one. All those kind of things that, these are costs that you are likely incurring because you're being in the business of being a

real estate investor. They're not necessarily specifically tied to a specific property, but you're still incurring these costs. And those are the ones that people tend to forget about, you know, whether, you know, it's various reasons, right? They don't know about it. They forget about it. Their books are a mess and they just not organized, you know, it could all of the above, you know.

Yeah, I think a common misconception is people think they need to have an LLC or a corporation to write these things off. And, I mean, I feel like we've said this a thousand times, but people still don't always understand it. So the deduction is a business deduction if it's ordinary and necessary to your real estate. You don't have to have an LLC. You don't have to have a corporation to write these off. Now, if you have an entity, that's fine too.

But having an entity is not a prerequisite to taking any of these deductions that Matt just mentioned. Matt, you said educational costs. Could I write off, let's say, a bigger pockets pro membership account? Ooh, I see what you did there. And I like it. Absolutely. Because it's going to help you learn, expand your investing business. You're going to make money on your real estate.

You're going to be able to be a better. buyer, a better operator, better seller, all that good stuff, right? And what about a trip to Cancun? Oh, for Bigger PocketsCon, 2024. There you go. For sure. I think on Instagram, I did a real last time when we went to San Diego about all the different things you write off. So, yeah, it's the tickets, it's the hotels, it's the flight. It's probably going to be all the meals, too, when you're there, right? Because I'm assuming you're not going to go and eat by yourself so you're there to network with other investors, people that you might be partnering with. So for things like that, yeah, those are pretty clear cut that those are business expenses.

Okay. And thank you because you did allow me to give a little bit of a plug. But also, there's a lot of people who aren't sure that they can write that off so they don't. And you're missing out on, look, every dollar you don't give to Uncle Sam is a good thing. Pay all that you should, but pay as little as you have to. Let's talk communication. Best practices. Best practice. That's a good one.

How can I work best with you, Amanda Hahn, my tax provider? I love that. That was her help me help you question, right? Yeah, no. Yeah. Well, you know, there are people who maybe have never worked with the CPA before and don't know what to expect. Do I just show up at your office with my roller suitcase full of all of my

receipts? Like, that's what you want, right? You know, I think the heart of tax planning, just like with real estate planning, right? As a business owner, we need to have the correct numbers. And what I mean by that is if you told me you made $10,000 in rental income is a very different set of strategies than when you tell me you made $50,000 of rental income, right? Or maybe even that you had a $10,000 loss. The strategies will be very different. So in year and tax planning, the first thing that we want to look at is updating your books and records, right? Get a good idea. We don't have to get to the exact dollar amount in the sense,

but we need to know overall big picture, where do we fall currently with respect to numbers? Because that's the first, the guidance on, okay, where do we go from here? How much income are we trying to offset or how much additional losses are we trying to extrapolate from the other resources you have? So I think, you know, in any investor, and also outside of taxes, too, as, you know, just as an investor, you always want to know, like how are your properties performing?

You don't want to just know that 12 months later and then figure out, oh, wow, I wish I would have know earlier I would have made some different business or investment decisions. Yeah, I think to your question about kind of communication, right, you know, in our experience, best practices there are just to have that open line of communication. So it can be as simple as sending your CPA or tax advisor an email just saying, here's what I'm thinking about doing. Do you have any feedback, input, comments, questions? all that good stuff, right? Because we can only help you to the extent we know what's going on in

your tax plan, your tax investing and all that good stuff. Right. So having an open line of communication helps us to start thinking strategically on your behalf versus waiting until, you know, we were joking off air, right? April 14th or even October 14th, that's a lot harder to help you for last year, right? Yeah. Yeah. So I treat my real estate like the business that it is and everybody listening should also be just like me and treating it like the business that it is. And I treat my tax professionals like the partners that they are. They are my business partners. They are providing a service for me.

And I need them to do the service. I want them to like me. I want to give them my numbers as soon as I have them. And I want them to be organized. So the easiest way for me to give you organized numbers is for me to have them be organized throughout the year. I don't throw everything into a pile and then figure it out on April 14th. That would bring so much stress. I put my, I just have the one property now, but when I had more than one property, they had their own folder. This property gets this information. This property

gets this information. And then you present this information. You can put it into a spreadsheet. Hey, do you like electronic numbers, Amanda and Matt? Is it easier to? do when the work is already there. So, yeah, if you are, here's a, here's a PSA from Mindy to everybody who is thinking about using a tax professional and you should be able to use, you should be using a tax professional. Organize everything by property. Make a Google Dropbox, make a Dropbox or a Google Drive folder to have the stuff there. Scan receipts and upload them.

You don't have to necessarily do anything with them in the moment. but have them available electronically. Take pictures of documents. More information is better because your tax pro knows what they're looking at. They see a document. They're like, oh, that doesn't make any sense or that, you know, that isn't relevant to this property. I'm putting it to the side. I would say more like you say more information the better.

I would say more organized information is better too. Thank you. I definitely tried to create folders with like that. That's like 22 taxes and then I click into that. And then it'll be like Cossags and LLC closing documents. and formation docs and all that kind of stuff because it's already hard enough to sift through all that. So really try to make things easier for your CPAs so that they don't have to like go digging in a haystack for a needle. Organized and with easy to understand names on those folders.

Like January 2022 is a really great way to label the January folder. I see Amanda smiling over there. I assume you don't get organized folders all the time. You know, so for our clients, we kind of enforce the issue. So for all our clients, when they upload, we set up the folders for them. Even better. They just drop it into those folders. But yeah, you know, I think the whole concept of like bookkeeping or tax planning sounds just really scary, you know, to the everyday investor.

But really, I think one thing you mentioned earlier, Mindy was like, hey, your tax advisor is your friend. So it's not scary to call them because the goal is for us, at least, I don't need my clients to tell me what the strategies are or ask me very strategic questions. All I need is for you to tell me, what do you have going on? What are you planning on doing? What are you thinking about? And that's all I need to know for me to then run with what are the strategies or the considerations for those. Bookkeeping, too. You mentioned a lot of really great ways to help people get their book set up.

And it's really about systems. People I think are always asking us, like, you know, what is your favorite way? Like, how do you want me to track my expenses? What software? And we always tell people, it's not about what I want, right? I just need a property by property. But it's about a system that makes sense for you. And for Mindy, it might be Excel, for Rob, it might be QuickBooks.

But we need it to be a system that you or your bookkeeper likes because ultimately you're the one that's doing it, you know, week in and week out. One of the questions we get a lot from newbie investors, you know, for someone who's just starting out, getting into bigger pockets, learning about real estate. maybe don't have a rental property yet and maybe don't won't have one until next year, it's still important to make sure you keep track of all of those expenses because even though you're not going to claim it on this year's return, right, since we don't have income yet, you certainly could carry those expenses forward into next year and claim those in next year

once you start to have real estate income. So, you know, just because you're a newbie and you don't have real estate income yet doesn't mean all these expenses are lost, there definitely will be benefit for you in the future. So make sure you capture those. Yeah, a couple of quick tips about business travel come to mind, too, is make sure you're documenting your travel ahead of time, right? That's a big thing that the IRA looks for is that if you are going to travel to Florida for a conference of some kind, you know, having email documentation in place before you book the airfare or the hotels versus just going down there and deciding, hey, I'm going to go to this conference or I'm going to go to this property, that's a good way to kind of substantial your

deductions. And another one, too, is if you are in business, with your spouse like I am. Obviously, we talk about business all the time. That doesn't necessarily mean that we're writing off every meal that we pay for because you want to be reasonable on everything you do, right? And yes, you are going to talk about business, but, you know, hogs get slaughtered, right? So be reasonable in your deductions. I think it's going to go a long way and helping you from a tax planning perspective. Amazing. Amazing. Well, thank you guys so much. I mean, again, for anyone that's wanting to dive into this world, be sure to check out episode 823 to get more into cost segregation. And if you want the very easy to understand manual on this, be sure to also get

the book on tax strategies. We always joke that I don't ever read, but I actually flip through this very often. This has taught me so much about 1031 and so many other things in my journey. So you guys put a lot of information out there. We appreciate everything that you do. If people want to reach out and learn more about you, Amanda and Matt, how can people do so? Oh, yeah. Well, first, I love it. Thank you so much for sharing that book. I didn't know you're a fan of the book as well. So thank you for that. It sits behind me every day.

Yeah, I could tell. You just rolled back and grabbed it. He was saying it sits behind him. It doesn't mean he's reading it, but it sits behind him. It's part of the visual background. Reddit, I own it. So yeah, like I said earlier, you know, if a lot of the concepts you talk about today is new to you, you know, short-term rental loophole, what is a real estate professional? Why do I care?

you go to our website at keystone cpa.com. We have a lot of great free resources that you can download. It'll give you some additional information regarding what exactly are within those strategies. And if you're looking for daily tax tips or want to know what we're doing outside of taxes and real estate investing, the best place to find me is on Instagram as Amanda Hahn CPA. And the best place to find me on social is right behind her in those Instagram videos. Awesome. Well, what about you, Mindy? where can people reach out and learn more about you on the interwebs? I am on Twitter is my favorite at

Mindy at BP. That's M-I-N-D-Y-A-T-B-P. Awesome. And you can always find me on YouTube and on Instagram at Rob Built, R-O-B-U-I-L-T. I talk about all things, real estate, short-term rentals, occasionally, a very simplified version of taxes, but never to the degree of the actual experts on this episode. So go listen to them for all of their tax tips. Thanks, everybody. We appreciate to listening. And be sure to leave us a five-star review on the Apple podcast platform or wherever you download your podcasts.

We appreciate you listen. And we will catch you on the next episode of Bigger Pockets. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K.

copywriting is by Calicoe Content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.w.w.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose.

And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast. Thank you.