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  • Writer's pictureColin Ghira

Case Study – Real Estate Investor

Maximizing Returns through Strategic Real Estate Tax Planning

Background:

A seasoned investor in residential real estate, owning both single and multi-family units, sought the expertise of Highborn CPA to optimize their tax strategy. With a vast property portfolio, the client aimed to unlock potential deductions and enhance overall tax efficiency.

Challenge:

The challenge was twofold – identifying substantial deductions without triggering an IRS audit and ensuring eligibility for bonus depreciation. Additionally, the client aimed to qualify for Real Estate Professional status, further optimizing their tax position.

Approach:

Highborn CPA approached the challenge with a comprehensive strategy that incorporated Cost Segregation Studies, careful selection of depreciation amounts, and meticulous documentation to support Real Estate Professional status.

Execution:

  1. Cost Segregation Strategy: Our team performed Cost Segregation Studies to identify and reclassify property components, accelerating depreciation deductions. This strategic approach unlocked significant deductions without raising red flags that might trigger an IRS audit.

  2. Bonus Depreciation Optimization: Recognizing the client's eligibility for bonus depreciation, Highborn CPA carefully selected assets that qualified for this accelerated deduction. This not only enhanced immediate tax savings but also contributed to the overall financial strategy.

  3. Real Estate Professional Status: To ensure eligibility for Real Estate Professional status, our team worked closely with the client to establish contemporaneous documentation of time spent on real estate activities. This included a detailed log of property management, renovations, and strategic decision-making.

Results:

  1. Approximately $200K in Deductions: The strategic implementation of Cost Segregation Studies, bonus depreciation, and meticulous documentation resulted in approximately $200,000 in deductions for the year. This substantial tax savings directly contributed to the client's overall financial goals.

  2. Audit-Resilient Strategy: Highborn CPA's careful selection of depreciation amounts and adherence to IRS guidelines ensured an audit-resilient strategy. The client could benefit from substantial deductions with confidence in the compliance of their tax position.

  3. Qualification for Real Estate Professional Status: The client successfully qualified for Real Estate Professional status, unlocking additional tax advantages. This achievement not only optimized the current tax year but also set the stage for ongoing benefits in subsequent years.

Conclusion: Highborn CPA's strategic approach to real estate tax planning for our investor client yielded remarkable results – approximately $200,000 in deductions for the year. By carefully navigating the complexities of Cost Segregation, bonus depreciation, and Real Estate Professional status, we not only optimized tax savings but also laid the groundwork for sustained financial success.

Contact Highborn CPA today to explore how strategic real estate tax planning can elevate your investment portfolio.


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