The Entrepreneur DNA - How the Wealthy Use Real Estate to Pay Little to No Taxes (CPA Breakdown) | CJ Tarantino

Episode Date: March 24, 2026

In this episode, I sit down with CPA CJ Tarantino to break down how entrepreneurs and high-income earners can use real estate and smart tax strategies to legally reduce what they owe. We get into depreciation, cost segregation, and how bonus depreciation can create massive write-offs in year one. We also talk about the difference between passive and active income, how short-term rentals can unlock tax advantages, and why most people are overpaying simply because they aren’t planning ahead. If you’re serious about keeping more of what you make, this is a conversation you need to hear. About CJ: Charles “CJ” Tarantino is the founder of Tarantino CPA and a seasoned Certified Public Accountant with over a decade of experience working with high-income earners, entrepreneurs, and real estate investors. He specializes in advanced tax strategy, helping clients legally minimize taxes through tools like cost segregation, bonus depreciation, and strategic entity structuring. Before launching his firm, CJ worked with top national accounting firms and high-net-worth families, managing complex investment portfolios, multi-entity structures, and multi-state tax planning. Today, he combines big-firm expertise with a boutique, relationship-driven approach—guiding clients to build wealth, protect assets, and optimize their tax strategy with proactive planning year-round. Instagram:https://www.instagram.com/cjthecpa Website:https://tarantino-cpa.com About Justin: Justin Colby is the host of The Entrepreneur DNA and The Science of Flipping podcasts and a best-selling author. He is a serial entrepreneur with over and a seasoned real estate investor with over 20 years of experience. Driven by a passion to help entrepreneurs thrive, Justin created the Entrepreneur DNA community to support business owners in building wealth, systems, and long-term freedom. Through his podcasts, books, education platforms, and hands-on mentorship, he continues to help entrepreneurs scale with clarity and confidence. Connect with Justin: Instagram: @thejustincolby YouTube: Justin Colby TikTok: @justincolbytsof LinkedIn: Justin Colby Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

What is up, the entrepreneur DNA family? I am back. And if you were an entrepreneur, whether you're in real estate or in general, you understand or need to understand, I should say, the tax law. With me is an accountant, a CPA focusing on entrepreneurship in real estate. Tarantino CPA is the firm. CJ Tarantino's the man. He is here. What is happening? What's up, Justin? I'm so pumped to be here. Excited to talk about tax savings with you. Let's go. All right, dude, well, as you know, I'm heavily in real estate, but I want to be talking to people aspiring to be in real estate, who are entrepreneurial, who are aspiring entrepreneurs. There's actually tax law that can help us never pay taxes again if we do it right, right? I mean, that's the idea behind it. Yeah, I mean, the tax law is written to incentivize people to invest in real estate, right? So there are. advantages built into the tax code to help you. So you definitely need to be aware. And that's what we're here to break that down a little bit more today. You and I are just kind of talking offline. There's so many different angles that we can take. Right. We're even just talking about your travel and like, are they vacations or are they business travel, right? But let's talk about some of the more obvious, at least to me would be obvious and maybe not known real estate angles. Like what are the angles? Why does everyone use real estate as the way that they don't pay taxes?

Yeah. When you're talking about this, you're really getting into the magic word, which is depreciation, right? And so that is a tax concept where you essentially have a paper loss that's sheltering your rental income. And there will get into the strategies to make that even more powerful. But really depreciation is a tax concept that's essentially allows for a recovery of the cost. of your real estate over time as a deduction. And, you know, oftentimes with real estate, you see that it actually appreciates, right? So you're getting the benefit of that. And then on taxes, you're getting to take this depreciation deduction. That's sheltering your income.

Is it is all assets the same? No. So there's different classifications depending on what type of asset, even what type of real estate, right? So residential is going to be 27 and a half versus commercial 39. Even like short term rentals fall under like the 39 year. And we'll get into how to make that even more powerful, how to speed up that timeline, which a lot of people are looking to do. Hey, I don't want to wait 39 years. How do I make that happen today? Yeah. Well, and listen, we're recording this literally on the 17th, I think of October, I think is today's date. Let's talk about this, right? Let's talk about bonus depreciation. Let's talk about the big, beautiful bill that just passed. Let's talk about what people want to hear, right? Like, how do we speed that up? Because that is not sexy to me to go buy a property and have to take my tax write-offs for $20. seven and a half years. Right. Why do we spit it up? Right. So you're going to get into this thing

called a cost segregation study, right? And that is going to be done by an engineering firm who has the background to assess that property. And what they're going to do is they're going to be able to break out certain parts of the real estate to different asset classes that are going to speed up that time horizon. And really what that's going to do is make a portion of that asset be eligible for bonus depreciation like you mentioned. Right. And, uh, One key really critical thing from the One Big Beautiful Bill was the 100% bonus depreciation. I mean, that is huge. It's a game changer.

Yeah. And the fact that you can go out and, you know, before your end and get something under contract and take advantage of this is incredible part of your strategy before your end. And really what the one big beautiful bill did was extend the previous tax law that Trump put in place and 2017 and now make that 100% bonus piece permanent going forward. If you recall, they actually, there was a decline in that in previous years, right? So if the one big beautiful bill didn't bring back 100% bonus, we were at 40%. Before that was 60 and then 80 and it's kind of been on a decline. Yeah. So now it's 100% and it's that way going. And it's specific to bonus appreciation, right? Correct. Talk the difference.

between bonus depreciation versus your normal, again, 27 and a half year depreciation schedule. Yeah. So if you don't, if you don't do a cost egg, you don't do bonus depreciation, you're, when you buy the, when you buy real estate, a portion is going to be allocated to land, right? That can be anywhere from 10 to 30% if you're in, uh, certain areas. 20. So that's about right. Right. Right. So, um, a portion going to be allocated to land and that's not going to be considered for depreciation. The remaining portion would, and that is the piece that's going to be covered over 27 and a half from 39 years. So say, let's talk numbers, right? So say you buy a million dollar property, right? 20% to land, that's 200,000. The 800,000 now

would be the eligible piece that would be over 27 and a half years. The cost aggregation is going to go and grab that number and break it into smaller buckets. And on average, you could see 20 to 25% benefit off that number. In year one. In year one. Yeah, that's the key, right? So this is why when people talk about these commercial people, and by the way, let's also distinguish like a single family home versus a commercial residential property,

to me, there's not really a comparison, right? Like this commercial asset is going to have much better tax writeoffs or, better tax advantages, what I'm trying to say, than a single family home. Right. I mean, it's based on the value, right? So the bigger the, the bigger the real estate we're talking, the more potential value there is to write off, right? So that's going to drive a better tax benefit for you. And really, yeah, this is powerful strategy. And then there's a lot of misunderstanding around, okay, I create this large deduction. Now, how does that help me? Or can I use that that that uh that's the answer for those questions yeah yeah yeah so um what confuses a lot of

people and we like to bring clarity around is uh active versus passive um laws and in in the tax laws and really i like to just quickly bring like how this came to be okay so in the in the 80s they created the passive loss limitations and what they were trying to prevent from happening was, you know, high income earners that would go out and just buy real estate just pure passively and not pay any tax. So they created these limitations to try to make that a little bit more difficult. Sure. So now there's really like two pathways to get to the extreme result where I create that real estate loss, you know, from the cost seg. And now I want to make those losses non-passive so they can offset my active income, my business income, potentially a W-2 income.

Yeah. So there's mainly two pathways I can go into how to get to that. So does the write-off only work against the income that the property is producing, or can it work against my W-2 income? Right. So good question. So to clarify on that, right? So it's really like there's active and then passive.

There's two buckets, right? So if you fall under the passive bucket, it's going to be able to utilize your real estate losses against passive sources of income. So your rental income would be sheltered, potentially another passive investment that you have. But a lot of people come to us and they're like, hey, how can I, I want to move the needle a lot. How do I create, how do I get this real estate loss to be non-passive so it can offset my W2 or my business income? Yeah. And that's really what we do a lot of planning around is how to achieve that result. What's the best advice you can give on that?

So there's really two pathways, right? So there's one concept of real estate professional status. Yeah. And that is where you're spending at least 750 hours in the year. Really want to be diligent about documenting that because if you're ever audited, they're going to want to see your time log of like how you're spending your time and what that looks like. Yeah. And then second part of that, which makes it difficult for W2 earners is the more time in real estate than anything

else that you do. And kind of the golden workaround to that has been if you have a spouse that can meet the real estate professional. That's why I see a lot of people do. Like if they are, you know, W-2 employee at a tech firm, they make their wife go get licensed and that is their her job and then they can utilize it like that. Now, what if the wife isn't on title? Does it still work?

So it's really is if you can file, if you file a file. jointly together. She meets those hours and it's basically you're combining their result together. So like I've worked with a lot of like medical professionals that they have high income doctor. Yeah. Just anyone really with a high income and their spouse has an interest and like, hey, I'll, I'll do some of their real estate activities. I'll meet the time. Yeah. And then you get this result where I'm going out. I'm doing the cost egg. I'm creating these large deductions, six figure potential deductions. And I'm taking that and I'm offsetting against my husband's, you know, high income, yeah, you know, medical salary. Is there, I mean, is there a reason anyone shouldn't be in real, like, I just,

I'm obviously in real estate, so it's very easy for me to say everyone should be in real estate. But like, there's a lot of ways to get tax write-offs, right? I mean, you're not only a real estate CPA, although that's what you focus on, but like, you can buy a heavy machinery and get great tax write-offs, right? Yeah, yeah, there's a lot of ways to, skin the cat, if you will, buying a business vehicle, buying equipment for your business. And it really gets into that's why you just want to work with a CPA who can take a holistic view to your situation to kind of give you the direction of like, hey, here's your options, here's what this looks like, right? Because maybe in a given year, you don't need to go through the effort of

meeting the real estate hours because you, hey, I have this business and I have this equipment that I'm going to buy anyway. And that's going to cover kind of my tax liability. Yeah. So it's just like having someone dive into your situation and really give you pinpoint tailored advice. I think that's really important. I think everyone's to some extent unique in what they need. I mean, I think all of us don't want to pay taxes. I think that's the out form. But, you know, do you do those type of consultations? Yeah, yeah. So what we are typical approach is we'll meet with you. Get a sense of what you have going on. Make sure we're a good fit to help you. Then we'll ask you for some information, dive into your situation, kind of come up with, hey, here's some

recommendations that we see. And we'll put a game plan together to kind of tackle that. And our goal is to make sure your tax efficient and optimized, right? You're not paying more tax than you need to. And you have the right structure in place, the right game plan in place. And that's really what our clients hire us to do. Where can they go to just find you now? I need to do something. How do they go find you? Yeah. So on on Instagram, CJ the CPA is our is our way to connect with us. Yeah. From there, we'll get in contact. figure out a way to book all of them. Yep.

All right, dude, listen, you know, there's a lot of different verticals in the real estate space. Short-term rentals had a huge rise since COVID. Let's talk about, like, what tax structuring, because it's part business, it's part real estate. Yep. Talk a little bit about short-term rentals and advantages and or disadvantages and or even misconceptions regarding short-term rentals. Yeah, so, you know, it is very interesting with short-term rentals, right, where it's real estate, but it's more of like an active business and that's why the rules are a bit different right so we've talked

about how in order to unlock some of the real estate losses you need to be a real estate professional this is kind of the workaround and why they you know a lot of people are referred to as a short-term rental loophole it's because you can kind of achieve the same result with less time spent so personally I have clients that are like high-income earners in the tech space and then they went out and bought a short-term rental and self-managed that rental to hit you want to most commonly people are spending 100 hours on on the property and more time than anyone else involved yeah that's that's a common pathway there are some others uh you just want to make sure your material participation in that property um and what that does is unlock the same result as real estate professional right where you can go do

a cost segregation on the short-term rental, create the accelerated depreciation, and then use that loss against your active income, W-2 income. Yeah. And so, but then to some extent, if it's a really good performing short-term, it may not cover it all. I mean, I guess it just depends on how much cost segregation, because the reality is if you buy a fully furnished brand-new rehab property, your cost segregation is not going to be much. much at all. So you will still get a pretty good benefit. Yeah. Because the cost said would break out the just structural piece of it. Yeah. 20, 25 percent. And you're going to get that big right off on front. But what a couple of things that are unique with short term rental as opposed to other

avenues of real estate is that, yeah, a lot of these are, are cash flowing quite a bit, right? Because you're spending a lot more time. It's dynamic pricing and things like that. So, you know, in the years after the cost set, you may still have some tax considerations to consider there, right? It may not be where that remaining depreciation is sheltering that rental income. Right. But it is a really powerful way to, and if you said, like, hey, what can I do before your end? I have a lot of clients asking me. You just had a client reach out to me yesterday that they got one under contract and they're hitting us up to do the whole strategy.

So it works. And it's where W2 earners can get into the. the game. Because like I had mentioned with real estate professional, that second piece where you need to spend more time in real estate than anything else that you do, the W2 employees, that's where you're kind of getting eliminated from that test. So then it becomes, okay, can I go buy a short-term rental? And I always tell prospects and clients, like, you just want to make sure you're not doing this totally tax-focused because it is, you know, you got to understand how to run a short-term rental. and I think a lot of people had success with it in previous years.

And now it's like you really need to be a high performer in the short-term rental space to make it worth it. You know, listen, I think it had it to run. I was never a big, like, short-term rental guy. The older I get and the more deals I've done, more the way I look at money, what I like about it personally, yes, tax-rotts, but also like you're building wealth at the same time. So if you can run a profitable business, and by the way, profitable sometimes doesn't maybe largely profitable. If like if I bought a short-term rental here in Miami, bought it for $2 million, it rents well and whatever, but brings in $35 grand that year, net, like after cost. Okay.

But also, they're paying down my mortgage. Yep. They're buying down the mortgage. And in the first five years, the mortgage has the highest interest rate, meaning your payments go mostly towards interest. So when I'm done with this first five years, and if I continue to keep it as a short-term rental, I have a multi-million dollar asset here, right? And I don't think people look at it in the same way I'm kind of looking at it right now. Yeah. I wouldn't be running it as a business model to get 40 of them, but could I go increase my net worth by $10 million by buying five

and then sell them off over time, right, and have $10 million in the bank? I just, if you look at it a little differently and you're not desperate for income, you want some tax write-offs because you're a high-income owner, and you want to accumulate wealth. bro, I don't know any other industry that can kind of be operated in a formal manner without having a crazy boatload of work to be put on your shoulders. Yeah. Yeah.

And I think it just like what you said, it just needs to fit into your strategy and your economic strategy and investment criteria. But the tax benefits is which I always say is like dicing on the cake can really be powerful. Right. So I had just the client, you know, a couple weeks ago where we were able to get them in 80 grand tax refund by implementing the strategy. Bro, and that's the other thing. People need to understand how the tax lot works.

You can actually push it forward. Let's say you buy a really great deal and it's a great cost-sig situation. The write-offs surpass what you earned on that property. That write-off now pushes into the next year. So another big planning component, right, is not always about what you do, but when you do it. Right. So that's a lot of the planning that we do and why we want to understand your situation and your goals because, hey, maybe it would be a good strategy this year, but it would be a great one if we waited until next year. Right. So layering in that with like, okay, what are you going to expect like a big income event next year? Let's let's maybe do the cost egg next year. Let's hold that back. Or, oh, you think you're going to go buy another property? Then, okay, let's use that cost seg this year and then wait. We'll have one coming online for next year. That's right. So it's just put like again, putting those. pieces of the puzzle together. So let's just talk a little bit wider scope, right?

I can talk real estate all day, but in a general sense, you and I were talking off camera about like interesting ways that the rules are written for us to abide by, such as business travel, business entertainment, eating business lunches. Let's talk a little bit more about that, like holistically, right? So if I run a real estate firm, that's great. buying assets has huge massive tax write-offs. I own two apartments right now. I'm actually raising on them because I need a couple more $100,000 to complete

their construction, but I'll give the person a general partnership ownership stake. They'll get the tax drive if they want and they don't have to do anything. It's passive for them. Yeah. Right. And they own the asset. They own the exit. They own the rise and they make money away through.

Real estate to me is a no-brainer for everybody, right? Even if you're doing it passively and you're like an investor to some of the like me, well, you don't have to be an investor, you can be an owner. But there's also other, you know, ways to have tax writeoffs as a general entrepreneur. Yeah. Entertainment, lunches, dinners, flights, hotels. Let's talk a little bit about like business travel. Yeah. So just one thing to clarify, do you just want to be careful with entertainment? And if you can not have it be classified as entertainment, so that's one that they actually did away with. Okay. In 2017. So anything that was pure entertainment. I think that was just people were,

abusing that a bit. Like if I take it to take me and my team to a baseball game. Yeah. They're going to say, no, it's not. Yeah, you want to say, you, you want it to be more shifted to how can I justify this as meals, meals for my team? Because that is still 50% deductible. So like when, you know, when clients send us our information and they have like meals and entertainment, we're going to say, hey, can this really be meals versus entertainment? So important clarification there. And then, yeah, business travel is is deductible, right? And it really the key is, You want to make sure you have established intent as to like why you're going somewhere, have that kind of itinerary dialed in, you know, have like, you know, be able to show on your

calendar, I had these meetings set up. It's really just a predetermined purpose that I went out there for business reasons. And then if there's some, you know, leisure mixed in, you're there for business, right? Yeah, that's right. So that's, that's really what you want to be able to establish. And what counts for the right off side, flights, hotel rooms. rentals, gas for the rental car.

Your meal while you're there. Meals while there are there are 100%. The meals would be, the meals would technically be 50%, but everything else would be deductible. 100% deductible. What if I take an employee, let's just use the example,

you're an employee and we have a business meeting in Dallas. So I pay for your flight, I pay for your room, I pay for, you know, the car and I go to dinner with you. Is the dinner still only 50%? Yeah.

Yeah, so the dinner would be 50. So the dinner is 300 bucks. I only get $150 worth of tax write off on that. That I can write off. Right. Okay. But your flight, your hotel room. All of that business, deductible.

100% deductible expense. Yep. So we have a mutual friend who just put something out about this. There's written in the law. If you employ your wife and your kids and they actually are doing something for your business, and you can prove that they're doing something for your business, that is also deductible. Yeah. And you just want to make sure again, it's just documenting it the right way, working

with the CPA that can help you. And it's really a powerful result, right, where you can pay your kids a salary. You want to have it documented, issue them with W2, the whole thing. And then you can do it where it's under the standard deduction. So you are essentially creating a write-off for your business and then they're not going to recognize the income because it's under the standard deduction. And then we even have clients that will just stash that in, you know, some sort of retirement account for them and kind of build that up for a problem.

Or an education account or whatever. Exactly. Exactly. And what's the dollar amount you can't pay more than like more than 14? So it adjusts for inflation year to year. So like recently it was 15,000. And then, you know, they adjust that over time for inflation. And those are for children.

Yeah. If you're an adult and you have a spouse, like the income could be greater, right? Yeah. Yeah. So for for it's really what, what you're. looking to do is just make sure that, um, it's just that you're going to get the standard deduction. That's going to, you know, eliminate the income hit. Um, so you, I mean, you could pay them more than that. It just made, you may have some tax on that, but you're still going to, uh, create a right off

for your business. Right. Right. Any salary you have, that's deductible. It's deductible against your business anyways. Yeah. And this is the beauty about real estate in my opinion. Here's why. I now have two ways to do this. I can employ my family, which gives me the deductions we're talking about and I can buy assets, which gives me further deductions, right? And this is why I just think, I don't care the vertical you're in. If you're, uh, you know, a doctor, if you are, uh, anything, like you're in marketing, like being in real estate, creating a real estate LLC, having your wife get licensed, you working in it, you buying it. Like, everyone should be in real estate. Is there a way to prove me wrong about that? Like, I just don't see why someone wouldn't

be. No, I, I honestly really agree with you on that because even in the case, so, so, so, so What happens a lot is people will come to us and they hurt on social media that I'm going to get all these tax benefits. And then we start to break down, okay, here are really the rules and the pathways. And you do need to spend some time in real estate if you want to write that off against your active income. Yeah. And then they get a little bummed out of like, oh, it's not as great as I thought, right? Right. But even if, like you said, if you're a passive investor, it's still a really great tax-efficient way to build wealth.

Yeah. Right? because you're getting losses that are offsetting your rental income, right? So your rental income isn't being taxed in most cases. And then even if you are creating a loss, you're building up your passive losses. That is another tool that you can use, right? It's just the fact that they can be used against passive sources of income. So it's really also a tax-efficient way, even if you're a passive investor.

What is a major, like if there's one major myth or two, or three, let's talk about some things that I think are misconceptions or myths out there. Because I really want people to be in, by the way, CJ the CPA on Instagram, make sure you go there now, hit them up. What are, maybe there's one, maybe there's a handful. Like, let's try to clarify some of either there's misconceptions or myths that are out there about taxes and how much you owe and how to get right off. Yeah, I think the biggest thing is right is that a lot of people are not,

working with the right professional, right? And two, two kind of comments on that, right? One, a lot of people have like just a tax preparer, which is fine. We prepare complicated tax returns too. But they don't have an advisory. I was going to say there's no advice with that. There's no advice. So a lot of people is like they're sending their files to their accountant. They're getting it done in March, April. Maybe they're getting extended. But really, that just reports what the planning. If there's no planning, you're just reporting what was done. There's no, There's nothing creative happening. Yeah.

There's no, there's no opportunity to really help you. Yeah, we'll dive into it and we'll say, hey, like, can you do a home office deduction? We'll figure out, like, a couple ways to help there. But really, the planning is what needs to be done now, right? So it's like critical October 17th that you're meeting with your CPA and like, what can I do before your end to help me so that I'm not kicking myself next year when I get my tax bill? I wish I would have done this.

And that's why this is such a pivotal. time to have this episode. So I'm glad that we connected. So again, what would be something that I think the public would think, you know, or question? Like that might be another question. Like, people might say, why are they paying so much in taxes? Um, you know, things are like where you live, the state taxes versus federal tax. I don't think a lot of people understand like there's actually two separate tax bills you're actually getting. You're getting a federal tax bill and you're getting a state tax bill. And there's different taxes within them. Right. So, the state of Florida doesn't have income tax, right? Not all states are that way, right? So let's go over

some of the basics of fundamentals of like the tax law, why they're getting tax the way they are, and then let's maybe give them advice of strategy to help themselves. Yeah, good, good point. So just with the federal versus state, right, you're going to get hit with your federal first and that's a graduated tax system, right? So once you're at a high income, you can get tax as much as 37%. right um then your state tax that varies by state and uh we're fortunate to be in florida with no state income tax we do get hit in other areas maybe like property tax yeah which i think we're starting to get some of those bills now but uh um yeah and then you know if you're in like california or new york those are some tough states to be in and a lot of the things honestly what that work

for federal purposes you'll see like california doesn't necessarily respect um they don't even they don't care about real estate professional and some of these things. Like, they make it difficult. So you definitely want to work, again, work with someone who's looking at your situation. And if you're in California, how can they plan around that? Yeah. One point to mention what the state is that they did with the one big beautiful bill act, they did raise the salt cap limit, which was a problem for a lot of people that were paying maybe like high property taxes. Before it was, if you itemized your deductions on your tax return, you're only allowed 10,000. as a deduction, even if you paid 20, 30, it's not been increased to 40,000.

So if you pay a lot of, you know, state level tax, that's thresholds increased a bit to create a benefit on the state level. And so clarify for me, you said salt. Yeah, so state and local tax deduction. So the hardest deduction you can get for the state and local is 40 grand. Yeah. So like that's on your personal tax return. So it's either you take the standard deduction or you itemize your deduction.

that's where you're bringing in like charitable donations and your medical and then your like state taxes and you're seeing is that bucket bigger than my standard and then you take the more favorable one piece of that itemized was the state taxes and that had a hard cap on it that a lot of people were frustrated with especially in high tax states yeah and they've increased that to make it a little bit more favorable what can a high income earner do like what can a doctor do as an example like what can people be doing right now to save themselves on taxes? Yeah, I would say meet with a tax advisor, the sooner the better. I could tell you, like, my calendar is starting to get pretty booked out with meetings and people wanting to meet with us and plan around this before your end,

but really look at, have someone look at your situation and see what are the two to three things I can really do in the short term to help me, right? And, you know, this is real estate focused. If it's, hey, should I try to go buy something before the end of the year, because 100% bonus depreciation would be a game changer. Huge. Well, and that's why even my offering is the way it's structured because I realize I need probably another $300,000 to finish my apartment. I'll give said person.

No need to go buy something. No need to go figure it out. You become a partner to me. Your capital gets the same tax write off as if you went out and bought it in the same way and you get the same tax right off, right? And so that's why I try to do that kind of stuff because a lot of people don't know how to go find. like a property. They don't know how to analyze a property. They don't know what they're doing.

Yeah. So a lot of times, again, the same reason that you do consultations is a similar reason people should be kind of strategically partnering with people who can operate real estate, right? Because if you're a doctor, you're not going to know a whole lot. Or maybe you're not going to have the time to dive into that, right? And that's a big one to get with someone like you that that's been doing this for years, right? That guy, hey, here's this asset you can invest in and could be a great fit for you. So I highly recommend that as well. I would encourage anyone to reach out to CJ for one basic principle is you're just going to do a consultation of where they're at and where they want to go, right?

Exactly. I think it's really hard for people. You know, I've had an accountant for very, very long, essentially my entire entrepreneur career for 20 years. And he's always laying into me about these type of things, right? We do a financial planning every single year. He's laying into what I can and cannot do. I think the car subject is a hot subject that people need to understand of what's an actual tax write

off with the car. Yeah. Because I think they need to understand the difference between what they write off. Meaning if you have a $3,000 a month car payment, is all three grand really a write off or not? And then why? Yeah. So you need to definitely, you want to have like your documented business use. So I'll see a lot of people that'll say, hey, I really, you know, I don't have another vehicle. So I really use this like 90% of the time. So let me like say it's 90% rather than the hundred. Yeah. So we're disallowing a portion to kind of be a little bit more conservative there. So you definitely want to be. mindful of how you're deducting those because there's the principal and interest payment let's see you have a loan is the principle and interest deductible so if you if you buy a vehicle you're going to essentially be able to take that it doesn't matter if you finance or not um if you lease it that's a different story but say

you go out and buy a vehicle it's similar to real estate right where you're not always buying it outright but you still that's now an asset for you right so it's you essentially could right start depreciating that entire cost of the vehicle rather than worrying about did I finance I put 20% down. That's what my accountant did is I went out and you were just in my range rover and he said, okay, well, if you do this by the way, buddy, if we all do this in the bonus depreciation in the first year and you go sell this in year two or three, they're going to say, hey, I want that back, right? Because I did it in the bonus appreciation model.

And so you have to be aware of what you're going to be doing when you take things like that. And that's a big thing. and just to come full circle, right, is that it applies the same with real estate. Right? So, and again, I'll kind of scream this from the mountaintop. So you just want to work with someone that's like, knows your goals in your situation and can advise you accordingly.

For example, if you do like cost segregation and bonus depreciation, it works the same way, right? If I do that and then I turn around and sell that asset in a year or two, you're going to have to figure out, okay, what am I going to do now? because I, you know, it could be an unfavorable tax result because you wrote off all that depreciation. Essentially gets recaptured. Again, there's always a strategy for a strategy. We can talk about, okay, what can we do now?

But you don't want to have any surprises, you know. What about a lease? How's the lease work versus a purchase? So with a vehicle, essentially you would, you could write off a portion of your lease payment, depending on how much of business use of the vehicle. So, for example, my family has two cars. I'm thinking about going and getting a lease. It would be for business purposes only.

I live in Miami, right? So I'm like, oh, I'd rather commute from my home to downtown, whatever, and more of a commuter style, like maybe electric car or something in that nature. It would be only for that. So if I went and leased that car, how much right off would I get for that? So then you'd just be looking at what is my lease payments? Let's call it all for the year. So $1,000 for the year.

So 12,000 for the year. And you look at, okay, what is my business use percentage? If it's 100, it could be 12,000. In my case, it would be. I literally, because where I live versus here. So I would just use it only to kind of make these commutes because it would be electric car. So I'd just save, you know, gas and pain in my butt, right?

And then just make sure you get that to your accountant so they can factor it in. And so all $1,000 that I pay every single month goes as a. So is your tax ride off? And do I need to put it in my LLC's name? or should it be in my name or can it be in my name? So really what it comes down to, I get this question quite a bit too, is that you just want to make sure that it's your documented business use. That's really more than it is titling.

It's documented business use. So we'll have people that will have it in their personal name. Just maybe it's favorable from like the financing component if you are financing. But really it's you want to make sure it more than it, is about titling, it's more like I can prove that I use this for business purposes. So like in your situation, hey, I only use this for my commutes for different business reasons. That would be defifiable. The thing that I've always been told. And then I want to get to another question, which is what are like the top two or three questions you get in general? Yeah. But the things I've always been told is

this really only matters if you're audited. At the end of the day, you can say to an accountant anything you want. I can say, hey, CJ, this is 100% business here. This is what I told you. This is all you know to be accurate. Awesome. That's what you put down on, you know, the tax return. When it matters is when you have to go prove it. Yeah.

Show me the receipts now, baby. Yep. Let me see that this is documented only for business, right? Oh, I see you're filling up twice a week. Where are you headed? Let me see where you're going all the time. Why are you, you know? And they will dive as far deep into it as that, right?

They'll really go down that road with you. So you definitely want to be careful. about being too aggressive, right? And a lot of like good CPAs will like let you know about the exposure and the risk because for me, right, I'm not necessarily going to take an overly aggressive position because I don't want to put the rest of my clients at risk. Totally. Right. So we're definitely in favor of the client. We want to strategize with you. We want to find the things that we can do to help you save on taxes. But we know the tax code. We research the tax code. We know what you. You literally have to study every year.

You essentially almost get retested every year is my understanding. So at some level like accreditation. Right. So like me personally, I have my CPA license, right, which took 18 months to get four exams to get it. And there's a level of continuing education that we have to fulfill to keep that license active. Right. So difficult to get and we have to maintain our skill set there. So yeah.

And really it's just you just don't want to put yourself at risk with taking aggressive positions. There's this set of rules that are very favorable. Just play inside that. Just play the rules, you know. That's right. And so, like, things like marketing, is that a write-off? Yeah. So if I do PPC marketing to find homeowners,

or if I do Facebook ad marketing to find coaching students, all that stuff is the write-off, right? Yeah. So it really, if you want to kind of give a general principle, it's like an expense that you have in the pursuit of profit, of income, right? So as long, I'm marketing expense because I'm trying to get new. business totally totally justifiable so let's let's kind of close this out with some of the top questions that you're getting anyways to help people understand like where they're at and then

I really need you guys to go get him on Instagram CJ is the CPA book a call with them right because I'm trying to do the best I can to pull out general information with you dude but like the reality is I have listeners in real estate not in real estate high income earners low comer like I need them to understand I need you to understand their scenario otherwise you guys are doing yourself a disservice by not getting with them at a minimum you get to understand why you're paying the tax you're paying why you don't have the write off or how you can get the ride off so CJ the CPA on Instagram maybe what are one to two or three top questions that you tend to get yeah Mike you're saying this stuff is so nuanced and so dependent on each person's situation right and it's

hard to like just in you know an hour go through it all right it really takes me with you and diving into your situation. So we see a lot of people like, we'll get like advice on social media and then just kind of run with it. And it's like some of the information is good. Some of it's not so good. Yeah. But it's really you need to talk to someone that can look at your situation.

A big one we get is people approaching us on entity structure. Mm. Is a big one, right? So like, should they have an S corp or should they have an LLC? What, what, what should they be thinking about there? So I'll give you kind of the, the quick. on that one. So like an S corp is a really efficient way for more active sources of active type of businesses. So they're like flipping. OLSISLA, you know, service based businesses. And that's because

you're going to get some savings on like the self-employment tax payroll side of it. Yeah. There's compliance components to it. So make sure you talk to someone that can help you there. And then one key thing is you never want to have buy and hold real estate in the the S-Corp. Number of reasons why you don't want to do that. There's a lot of limitations with the S-Corp to take some of those losses we were talking about. That's where it's more, it's more beneficial to be in like an LLC-type structure. Do you, what about a trust? Does the trust still have the same type of tax? So typically, and there's a number of different types of trust. Yeah. And the revocable

living is most common, right? That's essentially treated as like if it's you. Yeah. But it just gives the trust benefits there. So typically that would own the LLC. And really it's like the holding trust essentially. Yeah. So it flows up through your trust. And really the LLC is less about a tax consideration more of like asset protection. Yeah.

So you're holding this, you know, holding real estate in there and you want to be protected. Typically that's done in an element. You're playing the game right. You've probably had a lawsuit or two in your life, right? And so this is why you would want to have these assets in. an LLC, right? You're really just more doing protection-based, right? By the way, I'm not telling everyone you go get sued. I'm just saying if you've been to the game long enough, it's bound to happen. It's on point. All right. So S-Corp versus C-Corp. Let's maybe make some

distinguish there. So a C-Corp is not a very common thing you'll see in real estate. And that's because of a double taxation issue where you're going, without going too down the rabbit hole, right, is that the entity itself pays tax and then potentially what's distributed out to you gets taxed again. So not very favorable. That's more, you'll see that more in like the tech world and like some of the startups there may be in a center structure. With real estate, you're very commonly going to see like an LLC. And there's just flexibility with partners and the way you can structure things with

investors. And it's really a pass-through entity, meaning like the entity. Meaning like the entity in most cases doesn't pay tax itself, maybe some state tax in here and there. But if a loss is created on the LLC, that's going to get passed out to the owners of the LLC. So if it's you 100%, it just flows to your individual level. If you have partners, it gets allocated based on the operating agreement. So most commonly you're going to see an LLC. And then it's the question of should I be an S corp for any reason, right?

That's where we, hey, what type of business? What do you expect the business to make? Yeah. And then we'll kind of layer in. Does it make sense for you to be in escort? Yeah. I think a lot of this all sizes to do with, again, this is why you want to reach out just so you can get a consultation with CJ's.

It just depends on what you're trying to do, right? If you need layer of protection in the case, just in case I get sued world, that may be a different structure. Then, hey, I want the most tax write-off. It doesn't really matter. I'm not really going to get sued. Like, give me the best tax drafts, right? So what would be maybe to wrap up here, what would be the second most common thing besides

what entity structure is set up? What would be the second most common thing in general you get asked? Yeah. So they're coming to us and they're saying, how can I maximize the benefits in real estate? Right. So to bring it kind of home is they're meeting with us and they're saying like, okay, if I go and buy this asset, what would that look like for a write off for me? And how can I maximize doing a cost seg and that whole, that whole approach there?

And that's where we would again meet with you, get an understanding of what your history is, what your goals are, right, for the one to two years and beyond. And then kind of map out, you know, why I really love this business, right? Is I see it as like a puzzle in a sense, right? And it's like, what pieces can I put in place for you to achieve that result of like tax savings, tax efficiency? and just making sure that you're in the best structure possible. Yeah.

CJ the CPA on Instagram. Your website is Tarantino dash CPA.com. That is CJ Tarantino. I am Justin Colby and this has been the entrepreneur DNA. If you think you know a couple of people that might get some good advice from CJ, please share this with two your people. I'll see you on the next episode. Peace.

Thank you.