382. The Tax Strategy High-Earners Use to Offset Income With Real Estate
About this episode
Tyler Cauble discusses the tax strategy of cost segregation and its benefits for high earners in real estate investing.
Core Concept Cost Segregation = Accelerated Depreciation Engineering study reclassifies parts of a building into shorter lives (5, 7, 15 years). Combined with 100% bonus depreciation on 5- and 15-year assets → huge year-one write-offs . Impact vs. Regular Depreciation Straight-line 39-year on a $1M building → $25K/yr deduction ($9.5K tax savings at 37%). With cost seg + bonus → about $386K year-one deduction (~ $143K tax savings). Real Example Tyler’s $480K office : Cost seg study: $2,750 . Year-one tax savings: ~$141K (almost 30% of purchase price). Who Benefits Most High earners (especially 37% bracket) who: Have passive income , or Qualify (or spouse qualifies) as real estate professional , or Own the building their business operates from. Important Constraints Depreciation is usually a passive loss : Offsets passive income , not W-2, unless RE professional. If no passive income, losses carry forward . Recapture (~25%) when you sell; often managed via 1031 exchange . Must use a cost seg engineer + savvy CPA ; get a second opinion if your CPA dismisses it without nuance.
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