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The Book on Tax Strategies for the Savvy Real Estate Investor: Powerful Techniques Anyone Can Use to Deduct More, Invest Smarter, and Pay Far Less to the IRS!
Powerful techniques anyone can use to deduct more, invest smarter, and pay far less to the IRS!
Are you dreading tax season? Not sure how to maximize deductions for your real estate business? CPAs Amanda Han and Matthew MacFarland share the practical information you need to not only do your taxes this year, but to also prepare an ongoing strategy that will make your next tax season that much easier.
It’s time to take control of the bookkeeping practices for your real estate business. Start saving thousands with a great tax strategy!
In this book, you’ll learn:
- Creative methods to maximize your tax deductions
- Clever ways to write off your kids
- Strategies to write off every penny on your travel
- Easy tips and tricks to cut down on bookkeeping time
- Simple procedures that will protect you from an IRS audit
- And much more!
Audible Audio
Published December 13, 2018
417 people are currently reading
2013 people want to read
About the author
Amanda Han
2 books27 followersAmanda Han and Matt MacFarland of Keystone CPA Inc. specialize in cutting-edge tax saving strategies for real estate investors across the United States. They are both members of the prestigious American Institute of Certified Public Accountants and, as real estate investors themselves, Amanda and Matt have extensive experience in real estate-related tax strategies, entity structuring, and self-directed investing.
Their passion for educating investors has brought them to many national platforms on which they teach tax strategies and self-directed IRA investing, including NBC News Radio, Talks at Google, and Realtor Magazine. Their first bestselling book, Tax Strategies for the Savvy Real Estate Investor, has sold over 30,000 copies.
Their passion for educating investors has brought them to many national platforms on which they teach tax strategies and self-directed IRA investing, including NBC News Radio, Talks at Google, and Realtor Magazine. Their first bestselling book, Tax Strategies for the Savvy Real Estate Investor, has sold over 30,000 copies.
Ratings & Reviews
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Displaying 1 - 30 of 79 reviews
June 2, 2020
Fairly basic. Not a lot here that wouldn't already be known by someone who's had exposure to real estate.
March 2, 2018
Good not great.
It is hard for me to give a strong recommendation for this book because there is just not enough meat in the pages.
The stories are so long and the lessons are so over explained that it takes a few hundred pages to drill home a small collection of tax saving strategies.
In general, these are worthwhile strategies to pursue or at least be aware of and at least one of the ideas presented in this book was new to me.
If you are looking for an exhaustive book to explain in both breadth and depth about taxes for landlords, this book probably isn't for you. If that sounds boring and you would much rather pick up a few useful ideas while reading some stories about people's experiences, then you may enjoy this book.
It is hard for me to give a strong recommendation for this book because there is just not enough meat in the pages.
The stories are so long and the lessons are so over explained that it takes a few hundred pages to drill home a small collection of tax saving strategies.
In general, these are worthwhile strategies to pursue or at least be aware of and at least one of the ideas presented in this book was new to me.
If you are looking for an exhaustive book to explain in both breadth and depth about taxes for landlords, this book probably isn't for you. If that sounds boring and you would much rather pick up a few useful ideas while reading some stories about people's experiences, then you may enjoy this book.
July 9, 2020
I've been a CPA for 20 years, and also invest in real estate. I picked up this book as much out of curiosity as anything else. It is perhaps one of the best written books for the non-practitioner out there. If you are new to real estate investing, this is a MUST read. While you likely can't prepare a Schedule E off the book, you will get good advice on what to discuss with your tax preparer and how best to document and look for deductions. The book is written in normal English, using stories instead of code sections. There's not a ton of numbers, but there are a ton of useful tips and principles that anyone can follow...especially if you hate taxes. Even the experienced investor or practitioner may pick up a few tips along the way. I did. A great addition to the library.
March 24, 2021
Nerdy good read on how to keep your hard earned money and not be ripped off by Uncle Sam who is not really any relative of yours that you owe much too! Americans lose up to 1/3 to 1/2 of their earnings yearly to taxes! - “Ask what you get in return from your government!”
July 8, 2017
Great book for anyone in real estate of planning to go into it. Easy to understand and has some really valid, legal and mostly (to me anyway) unknown ways to save on future taxes and also to plan for the future. Fantastic!
July 17, 2017
Plenty of good information I did not know!
July 19, 2023
Very insightful book about how to save money in taxes on real estate investments. This opened my eyes to how wealthy real estate moguls are able to reduce their tax liabilities and accumulate more wealth. I wish there was more detail about the tax code and more specific examples, as they felt fairly simplistic and basic. That said, this definitely gives me a lot to discuss with my CPA!
May 19, 2024
Tax Freedom Day generally occurs sometime in April, and it is the day when the nation as a whole has theoretically earned enough income to pay its taxes for the year. For example, if Tax Freedom Day were April 30th, then all the money you had earned from January 1st to April 30th would be paid toward taxes. Then, May 1st would be the first day you got to keep your earnings free from taxes
What we learned when we started working with real estate investors is that many of them have been working with the wrong advisors, ones who did not specialize in real estate.
the U.S. tax code is lengthy. It is estimated by CNN to be roughly 73,954 pages long (and growing). This is just the official tax code itself. Then there are thousands and thousands of pages of Treasury Regulations that are the official and temporary interpretations of the Internal Revenue Code. Yes, that is right—the code is so confusing that we actually have thousands and thousands of pages just to interpret what the code actually means. Isn’t that ludicrous?
Once a picture has been taken of a receipt, you can shred that actual receipt and never have to look for it again. Yes, a scanned copy of the receipt is valid for IRS purposes!
You should also keep notes about the business purpose of the expense. For example, if it was a business meal, you should keep track of whom you met with and what you discussed.
Don’t think outside the box. Think like there is no box.– Unknown
The IRS has only two criteria it considers to determine whether a deduction is business related:
1) is this an expense that occurs commonly in your business?
2) the expense must be necessary in the course of your business.
the United States Tax Court recently allowed a body builder to write off the cost of body oils, because this expense is common in his line of work.
the Tax Court actually allowed this real estate couple to deduct their costs for this plane to visit their investment properties. Not only were they able to write off the cost of fuel and of hiring a pilot for these trips, but they were also able to write off a portion of the plane’s depreciation.
the IRS generally only allows us to write off 50% of these costs. For example, if you had a business meal with a client and spent $200, only $100 of that is tax deductible; the rest is not. A small loophole here is that if the meal is provided to the general public, then 100% of the cost is tax deductible. Generally, when you have an open house, you want everyone possible to show up, because you never know who your next buyer will be.
Another potential way to write off babysitting fees is as a charitable donation. Eric and his wife were on the board of a nonprofit organization. The fees Eric pays a babysitter so he can leave the house and do volunteer work for a charity are deductible as charitable contributions. The charitable deduction strategy works even when you’re not contributing directly to a charity. For example, if you wanted to roll up your sleeves to help your local Habitat for Humanity build a house, any sitter’s fees you’d have to pay to do so would be tax deductible charitable donations.
If they washed the cars, did the dishes, or vacuumed the house, she would reward them with some cash.
she began giving them painting, gardening, and rental repair jobs.
To do this properly, we recommended Erin put her kids on payroll. This meant setting up a payroll account with her local bank so that her boys could be paid each month and would receive a W-2 form at the end of the year. Each of the boys would then need to track their hours worked, along with a description of what was done. This could provide for proper documentation in the event of an audit. Although older kids can sometimes be paid as 1099 contractors, Erin would receive a better tax benefit by using the W-2 route, because her kids are both under the age of 18.
Another suggestion we had for Erin was to open a Roth IRA for each of her boys. As long as the kids were earning an income, they could contribute to a traditional or Roth IRA. These types of retirement accounts can offer great tax and investing benefits for such young people. For example, if Erin pays the boys $5,000 each year, that equals roughly $95 per week. If they spend $40 per week on food, movies, and friends, they can put the remaining $55 in their Roth IRA. Then all they have to do is sit back and watch it grow. Jeremy could have over $5,700 in his IRA before he even leaves for college, and Jason could have over $11,400 when he reaches that point. When the time rolls around to leave for college, the boys could withdraw money penalty free to pay for tuition, or if they waited a few more years, they could instead use the money for a down payment on their first home, again penalty free.
For you to deduct 100% of your travel expenses, such as airfare, hotels, and taxis, you must be able to show that the primary purpose of your trip was for business. The term “primary” simply means that more than 50% of your time is spent on business activities.
let’s say that an economy-class ticket for a round-trip flight between Los Angeles and New York costs $800, but a first class ticket costs $1,200. Technically, the $800 would be a business expense, and the $400 difference would be considered a personal expense. Therefore, you could still purchase the first class ticket and write off $800.
tips are tax deductible, too!
Given that Uncle Sam is sharing the cost of your business travel with you, these are times when it makes sense to spend a little extra (within reason, of course). You may not want to rent a Lamborghini, but maybe a little convertible would be a nice treat.
Overnight lodging is another deductible business travel expense. This includes room service, Wi-Fi, tips, valet parking fees, and even the cost of sending your suits out for dry cleaning.
one deduction many real estate investors miss is a meals and entertainment write-off. Keep in mind that this is a 50% deduction
you simply multiply the number of miles driven for business by the IRS’s standard reimbursement rate. For example, in 2015, the standard amount was 57.5 cents per mile.
The new simplified method allows you to deduct $5 for each square foot of home office space.
When you are establishing a legal entity, the goal is generally to either protect your assets, minimize your taxes, or both.
Occasionally, you may forget your business credit/debit card at home and have to pay for something business related from your personal account. In that case, be sure to reimburse yourself from the company so that all business expenses are accounted for in your books. However, if you forget your personal debit/credit card at home, don’t use your business card to cover any personal expenses.
If you have multiple properties held under one entity, make sure to keep track of which property each expense is for.
your business can’t protect your assets if those assets are still in your name personally! In addition to business accounts, you need to transfer real estate titles to your entity. If you are sued by a tenant or property manager, they can legally go after the person or entity whose name is on the title, and if that is your name, they may be able to take away your personal assets if you are otherwise unable to pay.
tracking each company in a different QuickBooks file may seem like too much work.
Companies typically charge several hundred dollars to help people dissolve an entity—and this is after the investor has paid thousands of dollars to set up their entities in the first place.
many investors do not know that security deposits and rental income are treated differently on a tax return. they may make the mistake of classifying both these items as income and thus accidentally overpay in taxes.
Consider keeping a drawer or box of petty cash for minor day-to-day expenses. For example, if you have a petty cash box with $300, you can dip into it when you need to order lunch for your contractors or to buy that $25 gift card for your landscaper. Just remember to keep these receipts and record the expenses in QuickBooks.
put $40,000 into his 401(k). $40,000 in his retirement account that he could use to purchase a rental property. He wondered why he had never heard of this “self-directed investing” strategy before.
The concept of self-directed investing is actually allowed by the IRS. Although the code does not specify what you are allowed to invest in, IRS Publication 590 discusses what types of transactions are not allowed (e.g., investing in life insurance). The concept of self-directed investing is not new. In fact, it has been around since the tax code was revised in 1986.
If your cousin started a software company that is about to take off, and you wanted to use your retirement money to invest in that business, you can.
Another perk of the Solo(k), one that is not available with an IRA, is the ability to borrow money from it.
Page 87, chart.
To him, it was just like moving money from his left pocket to his right pocket and getting a tax deduction for doing it.
There is no such thing as a “tax guru.” In other words, no one single person in the United States can claim to know everything about the U.S. tax code. That would be impossible. Have you ever met a health care guru? Someone who can clean your teeth, deliver your baby, and do heart and brain surgery on you at the same time? Of course not! The heart surgeon went to school for years and years and worked thousands of hours to fine-tune their skills in heart surgery. He is probably not the best person to choose when you need your teeth cleaned or a baby delivered.
definitely not one of those feel-good, chicken-soup
the IRS does specify a few things you cannot invest your retirement money in, such as life insurance contracts and collectible items.
Just as you would not want your dentist to diagnose your chest pain, you would not want to work with a tax advisor who does not specialize in the areas where you need assistance
Staring at the tax return line labeled as “depreciation,” Emma noticed those fields were indeed blank for each and every single one of her rental properties.
You may have heard that as soon as you drive a new car off the dealer’s lot, it loses some of its value. It is true that after you purchase a car, the value begins to decline or depreciate over time, and it is generally worth less each year. While this doesn’t seem like a particularly good thing, it actually can be a benefit when it comes to taxes. The IRS allows taxpayers to write off this decrease in value of the car as a business expense each year via tax depreciation.
Depreciation is generally taken based on the purchase price of the property regardless of its current fair market value.
Page 99, chart.
generally the purchase price is shown as one lump sum, and there is no separately stated amount for land versus building. If an appraiser breaks out the land versus building percentage on an official appraisal report, that allocation may be used by you to determine the portion of the purchase price of your property that is associated with the depreciable building. Another way to determine the land versus building breakout can be to contact the tax assessor’s office for the county where the property is located.
In this scenario, you would have $200,000 of land that is not depreciable and $300,000 of building that has a life of 27.5 years. This results in a depreciation expense of $10,909 per year. If you are someone in the 28% tax bracket, this depreciation alone can save you up to $3,054 in taxes each year.
if you only include the $300,000 of building on your tax returns, then when you sell your property a few years later, your taxable gain on the tax return may show $200,000 more gain than what is appropriate. Showing land on the tax return depreciation schedule, even though it does not depreciate every year, helps you to minimize the risk of over-reporting your gain.
How exactly does depreciation work when you sell a property down the road? Let’s say that you bought a rental property for $100,000, and over the years, you took $20,000 of depreciation. When you sell your property for $130,000, instead of having a gain of $30,000, it can actually be a tax gain of $50,000. Although your original cost basis was $100,000, your adjusted basis is decreased by the depreciation that you have already taken over the years.
More often than not, we come across investors who are advised by their CPA to not take depreciation and instead “save it up” for future years. A depreciation deduction is something that is required under the tax law. As indicated above, the tax code provides very specific methods and timeframes for how each asset must be depreciated.
If you are someone who has enough expenses to offset your rental income and do not need depreciation, take it anyway. In that scenario, the depreciation may create a net loss for your rentals, and that loss may be carried into future years to offset future rental income.
The difference between her dad gifting her the property today versus waiting to pass it on to her after his death as inheritance meant a potential tax savings of $401,000.
Page 108, chart.
Working with Jane and her family attorney, we recommended setting up an irrevocable trust with retained powers.
There are times when moving an asset to beneficiaries before one’s death could make sense , but at other times, it can be a costly decision.
For example, it is possible to use 1031 exchange strategies to permanently defer taxes on your properties. How? Simply die while owning it!
We have all had moments when we thought, “If I had only known then what I know now.”
losses on rental properties are ordinary losses, not capital losses.
Remember, don’t fall into the common mistake of assuming the 1099s issued by a bank are correct. We all know that banks, like everyone else, can make mistakes. If you are ever unsure whether your taxes are being done correctly, take the time to get a second opinion!
once a month, we pull those pictures off our phone and file them away in a folder (e.g., “March receipts”). If we ever need any of those receipts, we can just go to that folder, where they will already be sorted by date and time.
if you traveled to Las Vegas to address some issues with your rental there, taking a picture of the broken lawn sprinkler you drove all the way out there to fix for is an effective way to show you were actually there.
Activity logs such as mileage logs, calendars, and phone records are also great documentation that can help you prove your case in an IRS audit.
If you are ever notified that your returns have been selected for an audit, you can choose whether you want to represent yourself or have your tax advisor represent you. tax advisors generally have more experience.
if you are in the market for a new advisor, take the time to interview and find the best one you can afford.
Nexus = Taxpayer’s base of operations for state income tax purposes.
Pre-foreclosure = Time period during which the homeowner is in default but before the actual foreclosure action when they lose their ownership in the home.
Preferred stock = Nonvoting (typically) capital stock that pays dividends at a specified rate and has preference over common stock in the payment of dividends and the liquidation of assets.
Reverse mortgage = A type of loan that increases in balance as the owner draws against it. Typically used with older homeowners looking for a way to tap into their equity.
Reversing entry = A debit or credit bookkeeping entry made to reverse a prior bookkeeping entry.
Unrealized income = Profit that has been made but not yet realized or collected through a transaction.
Wrap-around mortgage = A new mortgage loan, subordinate to and encompassing an existing mortgage loan.
What we learned when we started working with real estate investors is that many of them have been working with the wrong advisors, ones who did not specialize in real estate.
the U.S. tax code is lengthy. It is estimated by CNN to be roughly 73,954 pages long (and growing). This is just the official tax code itself. Then there are thousands and thousands of pages of Treasury Regulations that are the official and temporary interpretations of the Internal Revenue Code. Yes, that is right—the code is so confusing that we actually have thousands and thousands of pages just to interpret what the code actually means. Isn’t that ludicrous?
Once a picture has been taken of a receipt, you can shred that actual receipt and never have to look for it again. Yes, a scanned copy of the receipt is valid for IRS purposes!
You should also keep notes about the business purpose of the expense. For example, if it was a business meal, you should keep track of whom you met with and what you discussed.
Don’t think outside the box. Think like there is no box.– Unknown
The IRS has only two criteria it considers to determine whether a deduction is business related:
1) is this an expense that occurs commonly in your business?
2) the expense must be necessary in the course of your business.
the United States Tax Court recently allowed a body builder to write off the cost of body oils, because this expense is common in his line of work.
the Tax Court actually allowed this real estate couple to deduct their costs for this plane to visit their investment properties. Not only were they able to write off the cost of fuel and of hiring a pilot for these trips, but they were also able to write off a portion of the plane’s depreciation.
the IRS generally only allows us to write off 50% of these costs. For example, if you had a business meal with a client and spent $200, only $100 of that is tax deductible; the rest is not. A small loophole here is that if the meal is provided to the general public, then 100% of the cost is tax deductible. Generally, when you have an open house, you want everyone possible to show up, because you never know who your next buyer will be.
Another potential way to write off babysitting fees is as a charitable donation. Eric and his wife were on the board of a nonprofit organization. The fees Eric pays a babysitter so he can leave the house and do volunteer work for a charity are deductible as charitable contributions. The charitable deduction strategy works even when you’re not contributing directly to a charity. For example, if you wanted to roll up your sleeves to help your local Habitat for Humanity build a house, any sitter’s fees you’d have to pay to do so would be tax deductible charitable donations.
If they washed the cars, did the dishes, or vacuumed the house, she would reward them with some cash.
she began giving them painting, gardening, and rental repair jobs.
To do this properly, we recommended Erin put her kids on payroll. This meant setting up a payroll account with her local bank so that her boys could be paid each month and would receive a W-2 form at the end of the year. Each of the boys would then need to track their hours worked, along with a description of what was done. This could provide for proper documentation in the event of an audit. Although older kids can sometimes be paid as 1099 contractors, Erin would receive a better tax benefit by using the W-2 route, because her kids are both under the age of 18.
Another suggestion we had for Erin was to open a Roth IRA for each of her boys. As long as the kids were earning an income, they could contribute to a traditional or Roth IRA. These types of retirement accounts can offer great tax and investing benefits for such young people. For example, if Erin pays the boys $5,000 each year, that equals roughly $95 per week. If they spend $40 per week on food, movies, and friends, they can put the remaining $55 in their Roth IRA. Then all they have to do is sit back and watch it grow. Jeremy could have over $5,700 in his IRA before he even leaves for college, and Jason could have over $11,400 when he reaches that point. When the time rolls around to leave for college, the boys could withdraw money penalty free to pay for tuition, or if they waited a few more years, they could instead use the money for a down payment on their first home, again penalty free.
For you to deduct 100% of your travel expenses, such as airfare, hotels, and taxis, you must be able to show that the primary purpose of your trip was for business. The term “primary” simply means that more than 50% of your time is spent on business activities.
let’s say that an economy-class ticket for a round-trip flight between Los Angeles and New York costs $800, but a first class ticket costs $1,200. Technically, the $800 would be a business expense, and the $400 difference would be considered a personal expense. Therefore, you could still purchase the first class ticket and write off $800.
tips are tax deductible, too!
Given that Uncle Sam is sharing the cost of your business travel with you, these are times when it makes sense to spend a little extra (within reason, of course). You may not want to rent a Lamborghini, but maybe a little convertible would be a nice treat.
Overnight lodging is another deductible business travel expense. This includes room service, Wi-Fi, tips, valet parking fees, and even the cost of sending your suits out for dry cleaning.
one deduction many real estate investors miss is a meals and entertainment write-off. Keep in mind that this is a 50% deduction
you simply multiply the number of miles driven for business by the IRS’s standard reimbursement rate. For example, in 2015, the standard amount was 57.5 cents per mile.
The new simplified method allows you to deduct $5 for each square foot of home office space.
When you are establishing a legal entity, the goal is generally to either protect your assets, minimize your taxes, or both.
Occasionally, you may forget your business credit/debit card at home and have to pay for something business related from your personal account. In that case, be sure to reimburse yourself from the company so that all business expenses are accounted for in your books. However, if you forget your personal debit/credit card at home, don’t use your business card to cover any personal expenses.
If you have multiple properties held under one entity, make sure to keep track of which property each expense is for.
your business can’t protect your assets if those assets are still in your name personally! In addition to business accounts, you need to transfer real estate titles to your entity. If you are sued by a tenant or property manager, they can legally go after the person or entity whose name is on the title, and if that is your name, they may be able to take away your personal assets if you are otherwise unable to pay.
tracking each company in a different QuickBooks file may seem like too much work.
Companies typically charge several hundred dollars to help people dissolve an entity—and this is after the investor has paid thousands of dollars to set up their entities in the first place.
many investors do not know that security deposits and rental income are treated differently on a tax return. they may make the mistake of classifying both these items as income and thus accidentally overpay in taxes.
Consider keeping a drawer or box of petty cash for minor day-to-day expenses. For example, if you have a petty cash box with $300, you can dip into it when you need to order lunch for your contractors or to buy that $25 gift card for your landscaper. Just remember to keep these receipts and record the expenses in QuickBooks.
put $40,000 into his 401(k). $40,000 in his retirement account that he could use to purchase a rental property. He wondered why he had never heard of this “self-directed investing” strategy before.
The concept of self-directed investing is actually allowed by the IRS. Although the code does not specify what you are allowed to invest in, IRS Publication 590 discusses what types of transactions are not allowed (e.g., investing in life insurance). The concept of self-directed investing is not new. In fact, it has been around since the tax code was revised in 1986.
If your cousin started a software company that is about to take off, and you wanted to use your retirement money to invest in that business, you can.
Another perk of the Solo(k), one that is not available with an IRA, is the ability to borrow money from it.
Page 87, chart.
To him, it was just like moving money from his left pocket to his right pocket and getting a tax deduction for doing it.
There is no such thing as a “tax guru.” In other words, no one single person in the United States can claim to know everything about the U.S. tax code. That would be impossible. Have you ever met a health care guru? Someone who can clean your teeth, deliver your baby, and do heart and brain surgery on you at the same time? Of course not! The heart surgeon went to school for years and years and worked thousands of hours to fine-tune their skills in heart surgery. He is probably not the best person to choose when you need your teeth cleaned or a baby delivered.
definitely not one of those feel-good, chicken-soup
the IRS does specify a few things you cannot invest your retirement money in, such as life insurance contracts and collectible items.
Just as you would not want your dentist to diagnose your chest pain, you would not want to work with a tax advisor who does not specialize in the areas where you need assistance
Staring at the tax return line labeled as “depreciation,” Emma noticed those fields were indeed blank for each and every single one of her rental properties.
You may have heard that as soon as you drive a new car off the dealer’s lot, it loses some of its value. It is true that after you purchase a car, the value begins to decline or depreciate over time, and it is generally worth less each year. While this doesn’t seem like a particularly good thing, it actually can be a benefit when it comes to taxes. The IRS allows taxpayers to write off this decrease in value of the car as a business expense each year via tax depreciation.
Depreciation is generally taken based on the purchase price of the property regardless of its current fair market value.
Page 99, chart.
generally the purchase price is shown as one lump sum, and there is no separately stated amount for land versus building. If an appraiser breaks out the land versus building percentage on an official appraisal report, that allocation may be used by you to determine the portion of the purchase price of your property that is associated with the depreciable building. Another way to determine the land versus building breakout can be to contact the tax assessor’s office for the county where the property is located.
In this scenario, you would have $200,000 of land that is not depreciable and $300,000 of building that has a life of 27.5 years. This results in a depreciation expense of $10,909 per year. If you are someone in the 28% tax bracket, this depreciation alone can save you up to $3,054 in taxes each year.
if you only include the $300,000 of building on your tax returns, then when you sell your property a few years later, your taxable gain on the tax return may show $200,000 more gain than what is appropriate. Showing land on the tax return depreciation schedule, even though it does not depreciate every year, helps you to minimize the risk of over-reporting your gain.
How exactly does depreciation work when you sell a property down the road? Let’s say that you bought a rental property for $100,000, and over the years, you took $20,000 of depreciation. When you sell your property for $130,000, instead of having a gain of $30,000, it can actually be a tax gain of $50,000. Although your original cost basis was $100,000, your adjusted basis is decreased by the depreciation that you have already taken over the years.
More often than not, we come across investors who are advised by their CPA to not take depreciation and instead “save it up” for future years. A depreciation deduction is something that is required under the tax law. As indicated above, the tax code provides very specific methods and timeframes for how each asset must be depreciated.
If you are someone who has enough expenses to offset your rental income and do not need depreciation, take it anyway. In that scenario, the depreciation may create a net loss for your rentals, and that loss may be carried into future years to offset future rental income.
The difference between her dad gifting her the property today versus waiting to pass it on to her after his death as inheritance meant a potential tax savings of $401,000.
Page 108, chart.
Working with Jane and her family attorney, we recommended setting up an irrevocable trust with retained powers.
There are times when moving an asset to beneficiaries before one’s death could make sense , but at other times, it can be a costly decision.
For example, it is possible to use 1031 exchange strategies to permanently defer taxes on your properties. How? Simply die while owning it!
We have all had moments when we thought, “If I had only known then what I know now.”
losses on rental properties are ordinary losses, not capital losses.
Remember, don’t fall into the common mistake of assuming the 1099s issued by a bank are correct. We all know that banks, like everyone else, can make mistakes. If you are ever unsure whether your taxes are being done correctly, take the time to get a second opinion!
once a month, we pull those pictures off our phone and file them away in a folder (e.g., “March receipts”). If we ever need any of those receipts, we can just go to that folder, where they will already be sorted by date and time.
if you traveled to Las Vegas to address some issues with your rental there, taking a picture of the broken lawn sprinkler you drove all the way out there to fix for is an effective way to show you were actually there.
Activity logs such as mileage logs, calendars, and phone records are also great documentation that can help you prove your case in an IRS audit.
If you are ever notified that your returns have been selected for an audit, you can choose whether you want to represent yourself or have your tax advisor represent you. tax advisors generally have more experience.
if you are in the market for a new advisor, take the time to interview and find the best one you can afford.
Nexus = Taxpayer’s base of operations for state income tax purposes.
Pre-foreclosure = Time period during which the homeowner is in default but before the actual foreclosure action when they lose their ownership in the home.
Preferred stock = Nonvoting (typically) capital stock that pays dividends at a specified rate and has preference over common stock in the payment of dividends and the liquidation of assets.
Reverse mortgage = A type of loan that increases in balance as the owner draws against it. Typically used with older homeowners looking for a way to tap into their equity.
Reversing entry = A debit or credit bookkeeping entry made to reverse a prior bookkeeping entry.
Unrealized income = Profit that has been made but not yet realized or collected through a transaction.
Wrap-around mortgage = A new mortgage loan, subordinate to and encompassing an existing mortgage loan.
June 22, 2018
This book is ok. It took me 30 minutes to read the whole thing, most of it is fluff.
It sells hype and provides half-truths. The book is full of fussy feel-good stories. People like that. This is done by salesmen effectively.
Tax liability - They know no one pays the federal tax bracket, the effective tax rate is not the same than you tax bracket. This is misleading information. Come on, that's a cheap trick for gullible people.
People do not work until april to pay taxes. That's a ridiculous and a misrepresentation of the truth. Shame on you.
Short sale example. A bank made a mistake on a short sale and bill the whole amount? Another half cooked truth to feed hype.
Vacation example. You would be better off placing a call rather than sandwiching your vacation.
Woman saving 3.9K by hiring their kids. Come on, see cheap trick above regarding misleading information. It's true, many people do not know what their actual effective tax rate may be.
The only thing to rescue in the book is the comment about the LLCs. use it or it's worthless, it won't even protect your assets.
If you want to learn about taxes, get the NOLO book on real estate. This is a waste of your time if you want to learn something useful.
It sells hype and provides half-truths. The book is full of fussy feel-good stories. People like that. This is done by salesmen effectively.
Tax liability - They know no one pays the federal tax bracket, the effective tax rate is not the same than you tax bracket. This is misleading information. Come on, that's a cheap trick for gullible people.
People do not work until april to pay taxes. That's a ridiculous and a misrepresentation of the truth. Shame on you.
Short sale example. A bank made a mistake on a short sale and bill the whole amount? Another half cooked truth to feed hype.
Vacation example. You would be better off placing a call rather than sandwiching your vacation.
Woman saving 3.9K by hiring their kids. Come on, see cheap trick above regarding misleading information. It's true, many people do not know what their actual effective tax rate may be.
The only thing to rescue in the book is the comment about the LLCs. use it or it's worthless, it won't even protect your assets.
If you want to learn about taxes, get the NOLO book on real estate. This is a waste of your time if you want to learn something useful.
April 16, 2018
Fun and easy to read book on a very unfun and difficult topic! The authors used great real life examples that helped me clearly understand the issue and possible solution. Must read for all real estate investors.
September 4, 2017
This book helps real estate investors to understand what options they have. Only when one understands the options, he/she can decide what to do.
The book shows that with a rental income property, one can choose to form a legal entity to limit the liability. However, you can deduct most of the expense when not have a legal entity and do not need to pay fees associated with the entity.
You will also have options to deduct your vacation, your real estate related educations and networkings, your kids/relatives and your home office, principle, interest, property tax, and insurance. However, you need to set up proper receipt management system to protect yourself from the tax audit.
You also have options to invest in real estate using your retirement funds. The option is called self-direct retirement account. All of your rental income will be tax deferred but you need to wait till 65 to enjoy the gain.
Planning ahead before selling a home can help you to save tax by 1031 exchange(trade up).
Die with the real estate instead of gift it can save lots of estate tax.
When real estate investment does not go well, you have options to ask Uncle Sam to share the loss. A subtle but astonishing difference here: the gain on real estate could be a capital gain(lower tax) and a loss on real estate is ordinary loss and therefore offset your ordinary income(higher tax).
You need to learn how to choose a good CPA. Choose one specialized in real estate. Ask the right question starting with "how to" instead of "Can I".
I like the way the author translate tax code into stories. The author covers a good range of topics with very logical structure.
The book shows that with a rental income property, one can choose to form a legal entity to limit the liability. However, you can deduct most of the expense when not have a legal entity and do not need to pay fees associated with the entity.
You will also have options to deduct your vacation, your real estate related educations and networkings, your kids/relatives and your home office, principle, interest, property tax, and insurance. However, you need to set up proper receipt management system to protect yourself from the tax audit.
You also have options to invest in real estate using your retirement funds. The option is called self-direct retirement account. All of your rental income will be tax deferred but you need to wait till 65 to enjoy the gain.
Planning ahead before selling a home can help you to save tax by 1031 exchange(trade up).
Die with the real estate instead of gift it can save lots of estate tax.
When real estate investment does not go well, you have options to ask Uncle Sam to share the loss. A subtle but astonishing difference here: the gain on real estate could be a capital gain(lower tax) and a loss on real estate is ordinary loss and therefore offset your ordinary income(higher tax).
You need to learn how to choose a good CPA. Choose one specialized in real estate. Ask the right question starting with "how to" instead of "Can I".
I like the way the author translate tax code into stories. The author covers a good range of topics with very logical structure.
March 24, 2019
If you haven't read about tax strategies for real estate investing before, this is a good introduction to it. As someone who has already studied the tax and financial aspects, this provided a lot of repeat information but still laid out in a way that is easy to read and understand. My only disappointment is that it didn't cover a lot of things I haven't already studied, but I still got a few new insights into those areas.
The book does have a lot of short 'real life stories' from clients, most of which end well but not all, and personally found them too long and could have just focused on the key details in a paragraph. Its pretty minor though, just skip them and they summarize the details in the analysis of the story.
Unfortunately, at the end of the day being your own DIY tax adviser is not a good strategy due to potential tax filing failures. You also can't expect any CPA to be up to speed on real estate, so this book should give you a good foundation by which you can quiz a potential CPA for their ability to handle real estate.
The book does have a lot of short 'real life stories' from clients, most of which end well but not all, and personally found them too long and could have just focused on the key details in a paragraph. Its pretty minor though, just skip them and they summarize the details in the analysis of the story.
Unfortunately, at the end of the day being your own DIY tax adviser is not a good strategy due to potential tax filing failures. You also can't expect any CPA to be up to speed on real estate, so this book should give you a good foundation by which you can quiz a potential CPA for their ability to handle real estate.
July 12, 2020
The title is pretty self explanatory. As a person that does not understand taxes too well, especially as they apply to real estate, I learned A LOT about what things qualify as tax deductions and how you can structure spending to reduce the amount of taxes you have to pay. Definitely a book I intend to refer back to selectively based on my future plans. I did learn that is important to get an accountant/CPA/tax advisor. However, if you do not have a sizable asset portfolio it may be better to wait until your financial situation gets a little more complicated before you apply the principles laid out in this book and seek out a tax advisor.
July 13, 2025
As a beginner who just bought my first rental, this book is perfect for beginners. It isn’t going to tell you every little thing you need to know, but it is going to give you a better picture and idea of how to look at things where taxes are related. I definitely recommend this because most books on real estate don’t touch on taxes hardly if at all. They always say real estate is good for taxes but don’t explain how. This also explains things in stories so you better understand the basics. I now know some things I need to do to write things off (keep receipts) and know more about what I actually can write off.
January 10, 2022
Great book.
I loved it! It really gives strategies and a lot of valuable information unknown to most people unrelated to the taxes field.
Easy to understand and digest, it provides data but also examples and stories.
And very solid advice on proactive tax planning for real estate, it open a ton of posibilities for me.
Loved the intro: "This book is dedicated to real estate investors everywhere : May this book bring you the power and knowledge needed to keep more of your hard earned money every year" ❤
I loved it! It really gives strategies and a lot of valuable information unknown to most people unrelated to the taxes field.
Easy to understand and digest, it provides data but also examples and stories.
And very solid advice on proactive tax planning for real estate, it open a ton of posibilities for me.
Loved the intro: "This book is dedicated to real estate investors everywhere : May this book bring you the power and knowledge needed to keep more of your hard earned money every year" ❤
April 27, 2019
Too many stories
This book frequently adds stories about people and their situations to teach a basic concept. I feel that this lengthens the book without adding much value.
This book cleared up a few things for me about what is tax deductible when traveling for real estate purposes. I also learned that it is better to inherit property rather than be gifted property because the former steps up the cost basis to the current market value.
This book frequently adds stories about people and their situations to teach a basic concept. I feel that this lengthens the book without adding much value.
This book cleared up a few things for me about what is tax deductible when traveling for real estate purposes. I also learned that it is better to inherit property rather than be gifted property because the former steps up the cost basis to the current market value.
December 24, 2019
Although there are a couple gems in this book, this is a far cry from the typical Bigger Pockets, no-nonsense, cover-to-cover practical guide book. This book hardly covers any comprehensive tax strategies and wastes valuable pages with anecdotes that are tedious to get through to find the couple senses of advice. Besides a couple good pointers, this book can be simplified into, “find a good tax advisor”. Definitely NOT for the savvy real estate investor.
March 11, 2021
Just like the title says, this book has tax strategies for the US based real estate investor. There are real life anecdotes to make the (in other books) possibly dry information interesting reading. Recommended for those getting started in real estate investing, or those in real estate investing who want to make sure they are not overpaying on their taxes by taking every tax deduction they possibly (legally) can.
July 30, 2022
If you're new to real estate investing or unfamiliar with IRS tax regulations this is a great book for you. However for the privy investor most of these strategies are very basic, some of them aren't even worth the tax savings in terms of the opportunity cost of your time needed for documentation. I did learn a couple small things though. I'm really looking forward to the sequel, The Book On Advanced Tax Strategies!
May 24, 2023
This book is great for real estate investor at many stages.. looking to buy your first property, a couple under your belt, looking to change strategies, etc. I actually looked forward to reading the book because it was almost like a comfortable conversation/narrative on taxes. I've listened to Amanda on a podcast before and I found her extremely knowledgeable yet really likeable and this book is no different.
November 8, 2021
While most of this is common sense and are things we've been doing for some time, I do like the way this book is written. It's not a "get rich quick" scheme and I did learn a number of things. It doesn't go in to the gory details of the tax code, but it does give a good overview on possible ways to save money. Overall, this is a good beginner's guide for real estate investors.
June 11, 2023
Good information, easily digestible, but fairly basic overall. I thought the title including “for the savvy real estate investor” was a bit misleading when a few sentences into the introduction the authors claim “we make our presentations easy for the average investor to understand” which would have been a more accurate title.
June 21, 2023
Speechless. Great introduction to tax strategies and topics you should discuss with your tax advisor & accountant.
The authors do an amazing job at changing the readers perspective about taxes. While it’s focused on the IRS (US tax regulator) I found a lot of paralleles with the CRA (canadian tax regulator).
Must read for all real estate investors out there.
The authors do an amazing job at changing the readers perspective about taxes. While it’s focused on the IRS (US tax regulator) I found a lot of paralleles with the CRA (canadian tax regulator).
Must read for all real estate investors out there.
April 26, 2025
The Skinny: Very easy to digest book on taxes that is a helpful read for RE investors at all levels.
The Good: This is a clear, concise, well-written book that is intentionally not technical. The use of personal anecdotes instead of numbers and tax codes is especially effective.
The Bad: A bit short. Wish it was 3x longer in the same format. Lots more to learn in RE tax world.
The Good: This is a clear, concise, well-written book that is intentionally not technical. The use of personal anecdotes instead of numbers and tax codes is especially effective.
The Bad: A bit short. Wish it was 3x longer in the same format. Lots more to learn in RE tax world.
July 25, 2017
Great tips for real estate tax benefits
This book is a great intro to tax strategies specifically for real estate investors. It is a must read for all real estate investors experienced and new.
This book is a great intro to tax strategies specifically for real estate investors. It is a must read for all real estate investors experienced and new.
March 21, 2019
Excellent look at some approaches to managing taxes specifically for real estate investors. I’ve no doubt that very experienced investors will know all the tips in this book, but beginners will definitely learn things.
October 4, 2019
A wise investment in your financial future
I loved this book with many stories of different investors and where they went right or wrong in their tax journey. This book has lots of actionable advice that can help you start saving money today.
I loved this book with many stories of different investors and where they went right or wrong in their tax journey. This book has lots of actionable advice that can help you start saving money today.
March 4, 2020
I really enjoyed this "tax" book, and I am not crazy about taxes, or reading a book about taxes per se - it was well written, not boring, and super specific: it focused on tax advantages for rental properties. It is a must read for any real estate investor.
June 26, 2020
Very easy to read and understand for newbie real estate investor like me. I liked the examples given to help me understand the concepts. I will definitely be applying the knowledge I’ve learned. However, for more advanced folks, prolly reach for another tax strategy book that is more detailed.
September 23, 2020
An excellent starter book on real estate tax issues. This is a great place to start your journey to reducing your tax bill. The focus is on Federal Income Tax but gets the creative and organizational juices flowing.
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