How to (Legally) Pay Less in Taxes as a Rookie Real Estate Investor

Ashley:
Welcome to Real Estate Rookie. I’m Ashley.

Tony:
And I’m Tony.

Ashley:
And today we are live from the BiggerPockets Conference in Orlando, Florida. And we’ve been going through the halls and pulling some of our favorite speakers to come and talk with you guys today on the podcast. So if you missed BP Con this year, make sure you come to the one next year. It was just released. We are going to Denver, Colorado in October of 2027. Make sure you check out biggerpockets.com/conference to see all the details so you can join us next year. Well, let’s give a big welcome to Matt and Amanda who actually did a tax session this morning, a workshop for investors who came a little bit early today to BPCon to get some tax advice. So what did you guys talk about in your session today?

Matt:
Nothing about taxes.

Amanda:
Well, it was a sold out session and it was three hours long. So first of all, I was super grateful that everybody stayed the whole time. We gave people a bathroom break in the middle and I really thought people wouldn’t come back. Yeah, but they came back. Yeah, but we talked about the life cycle of an investor and the different tax implications, starting with people brand new, maybe doing house hacking to those people doing burst, scaling the real estate, and also people doing into wholesale, fix and flip and then into syndications. And what are some of the tax planning opportunities as you go through each phase of your investing journey?

Matt:
Yeah. Some of the different foundational strategies that people can utilize as they move along in their journey and wealth building and stuff. So cool.

Ashley:
Now, who are you guys? Why should we listen to you for tax advice?

Matt:
Because you pulled us out of the hallway. So I’m Matt McFarlane, CPA and tax strategist at our firm, Keystone CPA. We work with real estate investors all over the country to help them proactively save on taxes, keep more of their hard-earned money and build wealth through real estate and other vehicles as well.

Amanda:
Yes. And I’m Amanda Hahn. You probably see me on some of the BiggerPockets podcasts. Matt and I wrote two books for BiggerPockets, the Tax Strategies book for real estate investors and then the advanced book for real estate investors.

Tony:
And just big disclaimer, those were both pre-AI. So you guys wrote every single word yourself. There was no chat or claw to help out at that time so you can believe it’s all

Matt:
Good

Tony:
Stuff. Before we jump in guys, because we talk about this often, but what is the difference between someone who files your taxes and someone who helps you with tax strategy? Because I think a lot of folks don’t have that distinction yet.

Matt:
Yeah. I think you think about tax filing, what you’re doing really is just taking numbers for stuff that’s already happened and putting it on a form and reporting what’s gone on in the past where true tax planning is actually looking at the future and what’s coming up, what are your goals, what are you trying to accomplish? Are you trying to build wealthy real estate? Are you trying to sell a business? Whatever it might be, thinking about the future and planning for it ahead of time versus sitting down in April when you drop off your tax stuff and saying, “Hey, what can I do differently?” That’s not tax planning, that’s just filing your taxes.

Tony:
Let me ask a question because the goal for a lot of people who invest in real estate is to leverage the tax benefits associated with it. I posted something a while ago and some nameless profile with a weird picture, but the comment stuck with me.

Ashley:
A troll,

Tony:
They call it. A troll. Yeah, it was a troll. Basically tried to make me feel bad for talking about how I’m able to reduce my tax bill. Hey, you’re part of the problem and yada yada yada. What is your guys’ take as CPAs? Are we as real estate investors and people who use tax strategy in general, are we somehow part of the problem?

Ashley:
Taking advantage of the system.

Tony:
Just what’s your take on that?

Amanda:
Yeah, I mean it’s really interesting because if you think about it, the tax rules are designed by the government and it’s really just a set of incentives on what the government wants you to do and the way they’re incentivizing us to do those things is through tax law and tax savings. And so really we get tax benefits when we invest and when we stimulate the economy. If you’re doing stocks or if you own a business and you hire people, we get tax benefits for that. And real estate, the government is not in the business of providing housing, so that’s why we get incentives as investors to provide housing for people. And so it’s definitely when done right, you’re basically just helping out the economy by doing what the government wants you to do and as a result you get incentivized for it.

Tony:
And it’s so true because I think about even just one property that I put together, it’s like I have to hire an agent on both sides for the transaction to buy it. There’s escrow companies involved, there’s insurance agents involved.

Ashley:
In New York there’s attorneys involved.

Tony:
There’s attorneys involved. When I actually close in the property, I have to hire electricians and people to put in the flooring and roofers and landscapers and someone to build the pergola. We’re employing so many people. And even for us in our short-term rentals, once we’re alive, now people are paying money to come save our properties and there’s cleaners and there’s property taxes being paid and occupancy taxes. We are very, very much even with one single property simulating the economy. So I just wanted to get your take because I’m sure you guys have gotten that question before, but that troll just, sometimes I’m laying in bed at night like, yeah, right?

Ashley:
Disclosure, it’s me because I know it bothers them so much.

Amanda:
Yeah, I do. I think SCPA suit, because we’re also on social media and we get that too. You’re the bad person helping rich people to avoid taxes.

Matt:
I mean it’s no secret that the tax code favors investors, business owners, but it’s up to people to change their facts. Are you willing to change the facts to take advantage of that situation, that strategy? And that’s what it really comes down to.

Amanda:
When I think for us SCPA suit, we see it when it works out well, the law does impact your decision as an investor. When they give us better depreciation rules, then we’re more inclined to buy more real estate or to improve on the property, which then just makes a better experience for the tenant. So yeah, I think when it works well together in the intended way, it actually helps everyone out. But I think some of those comments come from people who don’t understand. On the surface level, they feel like, wow, why do you get the better?

Tony:
We’re just getting free money it feels like from the government, right?

Ashley:
Now are there some other maybe TikToks that you have watched where there are some of these, not exactly backlash from society in general, but maybe just myths that are going out there or information that so-called influencers are spreading about taxes and the advantages and different things maybe you could write off that maybe are a gray area or not actually true that we should be aware of?

Tony:
And the reason we want to highlight this guy is because I mean a lot of people right now get their main source of information is from short form content and you don’t have to have any sort of certification to make a reel or TikTok about something. And if it gets enough views, enough people see it, enough people think that it’s true. So we would just want to kind of lay the foundation for what is true versus what isn’t true. I’ll give you an example. One of the ones that I saw recently, it was a well-known entrepreneur and he was talking about how he had this very expensive suit on and he just put his logo on the inside of his jackets. I know that guy. Yeah, on the inside of his jacket suit. And he’s like, oh, because I did this, this is now right after my business.
Is that a true statement?

Amanda:
No. So the true statement is that if you have, let’s say a polo shirt and you put your logo on it where people can visually see it, then yes, we’re using it as marketing purposes. But clearly when you just put it in the sleeve or inside your jacket pocket, who’s going to see that and what part of that makes it a business deduction? Unless you’re in the business of selling those suits, sure. But just a normal day. And I think that’s what a lot of what we see happening on TikTok and Instagram is they take real tax law, but then they spin it in a way to make it somehow a loophole or easier. But it’s losing the original context of the law. And that’s what we’re seeing, unfortunately, because you don’t have to be licensed to give out –

Matt:
Tax advice.

Amanda:
New tax advice.

Matt:
So Matt – Similar situation as a vehicle, same thing. People put their logo in a car and all of a sudden, it doesn’t matter if I don’t drive it 100% of the time, now it’s a tax deduction. That’s farthest thing from the truth. Obviously you still need to use your vehicle for business purposes, but just because you got a logo on it doesn’t mean everything’s a business model.

Ashley:
So is that one of the biggest things you’re seeing that maybe are one of those discrepancies or myths as write-offs that people are considering advertising their business in certain ways that really aren’t?

Amanda:
Yeah. I think like Matt was saying, people tend to think if I put a logo on it, then it is what it is. But you still have to look at… Another one I think we hear people talk a lot about is Augusta Rule where you can rent out your home to your business for 14 days and not pay taxes on it. The strategy by itself is valid. The tax law does allow you to do that. But I think what often goes wrong is the implementation of it, then people just think, oh, okay, I can just say I rented it to my business and not really look at what did I rent to my business for? What was I doing?

Ashley:
You had a 14-day camp with all your employees.

Matt:
Training camp. They were all staying at my house.

Amanda:
14 days.

Matt:
Yeah.

Amanda:
We actually had a client who said they were going to use the role, but no one was allowed to go to their house. So they’re just using their house to record. They were doing a Zoom, hosting a Zoom to charge the 14 days. But I’m like, well, you can just do that in your home office. As a home office, I’m kind of doing the same thing. But to say that you need your entire house for a Zoom video unless you’re live streaming.

Tony:
Show up the whole place.

Amanda:
So I think a lot of those things are either paying your kids or using a trust, there’s validity, but it’s just really about how do I actually use it correctly and not just blindly follow an influencer saying I could do it without knowing the details of what has actually happened.

Ashley:
Okay. So what should we be doing to actually document these things correctly? You’re saying don’t just slap a logo on something or is there different procedures we should be following so that if we are audited, here’s something we can at least show. Example, the Augusta rule, how are you documenting that?

Tony:
Is there an app? Is there an audit proof app where it’s just like, “Hey, here are all the different deductions you’re trying to take and here’s the way to track it correctly?”

Ashley:
If not, let’s create that.

Matt:
Let me trademark that.

Amanda:
Auto deduction protection app. Yeah, I mean it’s really interesting. I think different types of expenses and write-offs, there’s different ways to document it. So if we’re talking about Augusta rule, we have to be able to show reasonable rent. So that depends on how big your house is, what you’re using it for, are you charging by the hour? We can simply go on peer space, for example, to figure out what are other similar properties charging for the hour. And then I’m going to have documentation to show what is the business renting it from us. So for us, if we’re having an employee training, okay, what’s the dates? Make sure the money actually moves from the company to me.

Matt:
Got notes from the meeting, obviously the training that people are, you’re taking notes, you’re implementing them a week later, whatever, right?

Amanda:
Yeah. I would just say the simplest thing is everything you do from that context is to think about how would documentation work if it wasn’t me and my own company. So if I was renting my house to Tony, what are all the things that I would want to make sure he’s paying me reasonable rent? I would want to make sure he signs something. I’d want to make sure he actually pays –

Matt:
Well, we would charge him above market.

Amanda:
Yeah, above market. And so the same thing, paying your kids, all the same. How much would I pay if it was Ashley’s kids? That has to be reasonable.

Matt:
Yeah, the meetings have to take place. If you’re paying your kids, the kids actually have to be working. It’s not just, oh, I can give them $15,000 because that’s tax-free. No, you actually have to go through and do the process. And so I think it goes back to planning and who are you working with? Are you working with… Well, one, are you doing it yourself? Is this DIY or is this your meeting with a tax strategist or you’re meeting in April for last year like, “Hey, can I do income shifting from last year?” I was like, no. So I think working with the right people can help you put those guards in place, obviously.

Ashley:
I got one more question on the Augusta rule, then we can move on. And this just kind of came to me as something I haven’t thought about before, but is actually a big money near me where a lot of people do this is renting out their homes and their yard as wedding venues. So does that mean you could rent out to a wedding venue for 14 Saturdays and have that money tax-free? Because that is big money by me. You’re getting into a lot.

Matt:
Yeah. I mean, that’s what the law was intended for, like the Augusta Golf Tournament, same ideas. Yeah, you could rent it out for 14 events and obviously you can make a lot of money that way. Or we were talking earlier today at our workshop, just maybe you live in the area where the Super Bowl’s coming or something, and it’s like you could rent it out for four days and make a killing and totally tax-free.

Tony:
Does it not have to be 14 consecutive days? Oh, it’s just 14 days at any point.

Matt:
Yeah, that’s what

Ashley:
I was asking about the wedding.

Tony:
I always thought it had to be a consecutive day.

Matt:
Another misconception too is it’s 14 days or less. So if you hit 15 days, it’s all taxable. It’s not just an extra day. It’s important that people understand that if they’re going to, like what you’re talking about, I’m going to do it at X number of times.

Amanda:
Okay. And we have clients too who when they travel for an extended amount of time, they’ll rent out their primary home on Airbnb. So that’s the same concept. If you’re home, you rent it out for 14 days or less, then you don’t have to pay taxes on any of that income too.

Tony:
What are some other maybe bigger misconceptions that you’re seeing in terms of tax advice that people should be aware of right now?

Amanda:
I’m seeing a lot of information on social media about trusts. So always the thesis is –

Tony:
Can you define a trust just for people who aren’t familiar with that?

Amanda:
Yeah, trust is a type of an entity. We have LLCs, we have partnerships, we have corporations, and then there’s trust. So a lot of the content talks about how if you have an LLC or a corporation, you’re doing it wrong because you should do a trust and the trust somehow magically makes all of your income tax-free. And it’s a huge misconception because when we talk about trusts, trusts are taxed one of two ways. One way is disregarded, which means we don’t even care. It’s the same as if you still own the assets, you have all the income, all the expenses. So from that context, of course, there’s no additional tax savings, same as me. Or the trust could be its own taxpaying entity, in which case you don’t pay income, but the trust still has to pay income. So I think there’s a lot of misconception when people say, “Well, if you have a trust, you don’t pay taxes.” Well, you don’t pay taxes, but your trust is paying taxes.

Ashley:
So your properties, your cash flow from those properties are still being paid to taxes.

Amanda:
Yeah. The trust and the trust rate, tax rates are less favorable than individuals. Interesting. So a lot of times you end up paying more taxes. I think it just sounds so sexy.

Tony:
Sexy and here’s this crazy secret.

Ashley:
I mean, really is one of the big benefits just for your kids.ate planning,

Matt:
Transferring assets to another generation, things like that. I mean, it can be used for other things, but that’s one of the main purposes for sure.

Tony:
One of the other questions that I have is people feel that they have to have these really complex legal structures to take advantage of any of the tax benefits. But let’s say that I’m just Tony and I start buying real estate, there’s no LLC, there’s nothing. I’m buying loans are in my personal name. Everything’s just me. Can I still take advantage of the real estate related tax benefits or do I have to set up an LLC to –

Matt:
No, that’s a great question because we get that a lot. I think it’s a misconception is that absolutely, you don’t have to have an entity hold title to rental real estate to get the tax benefits, the deductions. Basically how much income you pay, what you can deduct, what strategy, basically the same way you own it personally or you own it through an LLC that’s single member LLC, a partnership. Either way, the tax law doesn’t change. It’s more of a, why would you do that? You would do it for asset protection reasons. So if somebody slips and falls, they have to sue the owner, which is the LLC and not Tony. So yeah, I think a lot of people think that they have to have an LLC before they even buy my first rental real estate. I got to get this in place before I do that.
It’s like, no, you just have to go take action. Go buy.

Tony:
And that’s why I ask that question, Matt, because I feel like a lot of folks are like, “Hey, I need to get all these things in place first.” But you don’t even have a deal yet. Go get the deal first and then figure out how to asset protect, but you don’t have any assets yet.

Amanda:
We don’t have assets. And we unfortunately as CPAs, we see that a lot where somebody goes to a conference, not BiggerPockets, but some other conference where –

Matt:
Full disclosure, not BiggerPockets.

Amanda:
And they are told they have to have all these entities, a baby LLC, a holding company, and a management company, and a nonprofit. And so they spend a ton of money forming these entities. And like you said, if at the end of the year they still don’t own anything, well, guess what? Every entity still has obligations to file a tax return, to pay the state, to pay the attorney. So we actually tell our clients the opposite. Let’s not hurry to do it. Let’s find out what are you going to buy? Where are you going to buy? When we’re close to acquisition, then let’s form the entity so we’re not pre-spending money that we don’t need.

Matt:
Yeah. Another way to look at it too, it’s always a bad sign if we ask a question like, “Well, what’s that entity going to be used for?” And they can’t explain it like, “Well, I think they said it was going to be this.” All right, you already know you’re in past what you need.

Ashley:
Are there any other myths that you can think of or fleshy things?

Matt:
One that we’ve seen recently is the… Obviously we talk about short-term rentals a lot, and the one we’ve seen recently is the buy a property, close on an air in December, you don’t even have to furnish it. You can rent it out for one day to –

Amanda:
The seller.

Matt:
The seller, somebody else. I don’t know. Some related party of some whatever. It’s just rent it for one day and now I have a short-term rental. And then January 1st, you can turn it into a long-term rental. There’s aspects of that that are true, but when you put it all together like that, that’s not the intent of the rules. The intent of the rules that you are renting it out as a short-term rental. I don’t know who rents out unfurnished short-term rentals.

Tony:
Can I give you a counterexample to that? Because sometimes you’re the end of the year, we’re recording this in October, near the end of the year, we maybe buy a property that isn’t designed the way that we wanted it to. There’s still furniture in there. It’s still a safe and usable space. And say I closing a property on December 15th, I spent a week there getting some version of it set up. I hit my 100 hours to be able to qualify. I have someone check in, maybe one or two people check in, average iteration is seven days or less. And then on January 1st, I shut it down to finish off my setup. Is that strategy fine?

Amanda:
Yeah. Yes, because in this year you had a valid rental property. With furnishing, you had guests coming in and out, paying fair market value rent.

Ashley:
Two star reviews,

Tony:
But… Very unhappy that they stayed there, but the IRS doesn’t care about that part.

Amanda:
And I think everybody, it’s so interesting because short-term rental is a loophole in itself. It’s where people who are W-2 income earners and they don’t have to quit their job and real estate could really be a side hustle and they get all the depreciation and write-offs. But again, the original intent of the law is great, but people try to add a loophole to the loophole and just say, “Well, actually, who said we need furniture?” Well, I mean –

Matt:
Who said we need tenants?

Amanda:
The public says. If I’m paying for STR, then I’m expecting to have a place to

Tony:
Send furniture.

Matt:
And it’s not to say that your property can’t be a short-term rental that gets turned into a long-term rental or mid-term rental. Every tax year does stand on its own. But again, what we tell people is if you were to get audit for some reason and they audit 2026 taxes, well, they’re going to ask for a copy of 25 and they’re going to ask for a copy of 27, and all of a sudden they see that your property was a long-term rental for 365 days. Just seems like it begs them to want to just dig deeper and get into it. So we tell clients, “Hey, you can turn into long-term rental, but maybe not do it January 1st. Maybe let it play out for as a short-term rental for a few months and then the market changes or whatever.” So there’s ways to do it, but it’s –

Ashley:
You could do the Airbnb experience though, like a squatters experience. You’re moving into a vacant home if there’s no furniture in the short-term rental, so you don’t have to buy the furniture.

Tony:
We were saying sell it as an experience with experience.

Ashley:
You move into a vacant home with no furniture or anything.

Tony:
No running water, no lights.

Ashley:
The utility shut up.

Amanda:
Parents will pay for that experience for your kids who they’re not doing well in school.

Tony:
We’re going to book this for you. For folks who aren’t familiar though with the short-term rental tax loophole, how do short-term rentals differ from traditional long-term rentals in the eyes of the IRS? And why are so many high income earning individuals focused on short-term rentals right now?

Amanda:
Well, because the traditional rule for regular rental properties is if you create these tax losses through write-offs and depreciation, you or your spouse, if you’re married, one of you has to be a real estate professional if you want to use the losses against W-2 income. But to be a real estate professional, you or your spouse have to basically have more hours in real estate than your job. And so if you’re talking to a couple who are both high income earners working at a job, it’s almost impossible for them to be able to use long-term rental losses against W-2. But for short-term rentals, it’s different in that you don’t have to be a real estate professional. So you could, as long as you meet material participation, and like you said, that could be as little as a hundred hours as long as nobody else has more time than you.
So real estate could really be a side hustle for you, and you could be able to use that to offset W-2 income. So that’s why it’s termed a loophole, because it goes against the traditional rule of being a real estate professional.

Matt:
It’s almost like they look at it like it is a business obviously, but instead of treating it like in that rental real estate world, they treat it as like a business and you can show that you’re materially participating in the business and you’ve created these losses, then you can use them.

Tony:
Let me ask, I know I get this question a lot, but it’s like if we go back to that same example of like, “Hey, I get the property set up, I get my couple guests in, and then on January 1st, instead of turning into a long-term rental, I pass it off to a property management company.” Is that fine in the eyes of the IRS or should we also hopefully maybe extend the self-management a little bit further?

Amanda:
I mean, I typically recommend, I mean, technically under the law, it is a year by year. Every year, is it a short-term rental or not? Did you meet the hours or not? But for best practice, we typically recommend our clients, especially if you put it in service at the very end of the year, is to try to self-manage it for a couple months. How many months is it safe? I mean, it’s hard to say, but if you managed it for one month, it’s better than none. If you did three, it’s better than two. So it’s kind of up to how much you’re willing to do. I mean, you guys know when we talk about short-term rentals or real estate in general, we’re not saving 500 bucks in taxes or a thousand. Sometimes it’s 30,000 or 50,000 or you’re wiping out all of your taxes. And so to do a little bit more work for a couple months just to make sure you are safer if you’re ever audited could go a really long way versus what if you have an aggressive auditor who then disallows it because you turned it over to a management immediately on January 1st.

Tony:
Aside from the short-term rental tax loophole, if I’m a high income earning W-2 employee, is that the best tax strategy right now to reduce your income or are there any other strategies where you guys like, actually this might stack up just as well or if not better than short-term?

Ashley:
And it doesn’t have to be real estate.

Tony:
It could be – Even just anything outside.

Amanda:
I would say if real estate, then you can always marry a real estate professional.

Tony:
That’s always a good one.

Amanda:
If you’re single. But I mean on a serious –

Matt:
R-E-Pmatch.com.

Tony:
We just came up with two great business ideas on this podcast. We got the app. The dating connection and the audit app.

Amanda:
Yes. But I mean, the reality is we do have a lot of clients who are married couples both working. And when you do an analysis, sometimes it makes more sense for one of them to stop working and build the real estate portfolio because you can come out ahead where, okay, if somebody was making 60,000 or less and they stopped working, they could save 80 or $100,000 in taxes by not working. So that is something to consider if we’re talking about real estate. But I guess, I don’t know, investment

Matt:
Wise… Outside of real estate, we have high income clients that do invest in oil and gas drilling partnerships and looking for oil to earn royalties. One of the reasons from a tax perspective they do that is because they do let you take a big write-off in the first year and you can deduct it against your W-2 income even though you’re not doing anything for the oil, you’re obviously not drilling it yourself. So that’s one of the rare exceptions in the tax code that makes it a tax efficient investment. Obviously you’re investing in to make money, that should be first and foremost, obviously, but that’s one that we see.

Amanda:
Yeah. But oil drilling is not as –

Matt:
Sexy?

Amanda:
No, not as safe as real estate.

Ashley:
Yeah, I watch Landman.

Tony:
I haven’t seen that. Is that with Billy Bob Thornton?

Ashley:
Yes.

Tony:
Yes.

Amanda:
It’s a depleting asset. It’s a good

Tony:
Show.

Amanda:
It’s a depleting asset. I mean, traditional stuff for high income earners, 401ks and health savings account, all those things that are not business related, but just saving for your own future, saving towards your health future. Those are all really good. We have clients who are pitched all types of different investments, film. I don’t know if you guys have seen those on TikTok, film investing or crypto mining. Heavy equipment I’ve seen. Heavy equipment. All those are kind of the same pieces as real estate where we put some money in, there’s leverage that we get, and so we take on the debt and we somehow earn the hours in that investment asset and write it off. But I always tell our clients, outside of taxes, you have to really understand what’s actually going on. And if we use heavy equipment as an example, yes, we can write it off, but that is actually an asset that is depreciating.
I’ve never heard of an equipment that became more valuable to him either. And so it’s just a very different thing. For real estate, when we take on debt, most of the time is non-recourse. So the worst thing, bank takes the asset. But in all, I don’t want to say all, but most all other investment classes, you have to take on a personal guarantee. And so that’s the risk. Well, that’s also a sexy investment, but am I willing to take on additional debt where I’m on the hook for? And once people understand all those different intricacies, they usually just say, “Well, I think I’m just going to have more real estate.”

Ashley:
Now, before we wrap up here, is there an example of maybe another job industry? Because you work with a lot of real estate investors. Is there another job industry that maybe a lot of people come to you for that’s maybe to offset their income besides just a standard W-2 high income earner that’s maybe looking for things like this?

Matt:
Yeah, we have a lot of business owners come to us that are doctors, dentists, attorneys, service providers, businesses like that that make a good living obviously, but are looking for tax strategies for the business itself. It actually transitions to tax strategies for the individual too. But that’s the important thing is looking at the whole picture. What can we do to help you in the business? What can you do to help you personally? So yeah, there’s definitely people like that where we can talk about different strategies for the business too.

Amanda:
Yeah. If you’re a business owner, one of the levers to look at is does it make sense for me to own the property where my business is being operated out of? So dentists owning their own medical building, doctors owning the medical building, things like that. If you are operating a business where you own the real estate, a lot of people don’t know this, but you actually don’t have to be a real estate professional, then you can use the losses from the building directly against your active income. Interesting. It’s called a grouping election in the tax world where I’m saying, “Well, I have my medical business here, but I have my rentals in an LLC over there. I’m going to group it together for tax purposes, so one incomposite.”

Ashley:
Interesting.

Matt:
So that works really well when the tenant is obviously your medical practice and you own another entity, you’re setting it up that way, one, for asset protection because you don’t want to segregate the real estate and the liability from the business. But then there’s that way You can still utilize the benefits of the depreciation.

Amanda:
Oh, I will say we do. For some reason, in the past couple years, we’ve had more influencer clients on social media and a lot of them, because influencing is not real estate, so they would have to be a real estate professional doing short-term rental loophole. And short-term rental loophole works really well for those people because they already have a captive audience on whatever their content is. And so it’s much easier for them to also

Tony:
Showcase the properties

Amanda:
And just a lot of write-offs in general.

Tony:
On that note, you guys talked about different clients coming in. If I’m a rookie who’s maybe shopping for my first CPA, my first tax strategist, because you talk a lot about how do you find a good agent? How do you find a good lender? Very rarely do we talk about how do you find a good tax strategist? So if I’m a rookie and I’m sitting across the table from someone, what questions should I be asking them to know if they’re actually a right fit for me as a real estate investor?

Matt:
I mean, I think one question is, I guess one question not to ask is, do you work with clients in real estate? Because they’re always going to say yes because they’re going to have somebody who owns real estate. More it’s like, what are your successful real estate investors doing? If you’re trying to get into some avenue, if I’m trying to do the short-term rent, what are your successful short-term rental investors doing to make money? What are they doing to save tax? Whatever the question might be, because then you’re forcing them to elaborate and you can quickly tell whether they can talk to talk or not. I think that’s one tip that has worked well for a lot of people that we’ve talked to.

Amanda:
Yeah. And you also just want to know whether they invest in real estate because real estate people, we have our own little language of acronyms and stuff and just very different creative transactions that I know you guys talk about a lot. So you never want to be the person teaching your accountant real estate or taxes or strategy. So just give me understanding, do you invest in real estate? Just talk to them like you would any other investor. I think you’ll quickly be able to see, do they know what you’re talking about or they just have no idea? It’s kind of a different dictionary.

Ashley:
I’ve been somewhere where I was with someone and they were at their accountant, it was a new accountant for them and I went with them

Amanda:
And

Ashley:
I’m just sitting there, whatever, but they have the screen, so it’s facing you as they’re doing your taxes right there. And so I asked about real estate professional status. I said, he has the hours, all this stuff or whatever. And I was like, it’s that little box right there that you check. And he’s like, oh, I don’t think I ever checked that. Let’s see what happens and check the box.

Tony:
Oh

Ashley:
Yeah,

Tony:
Your

Ashley:
Taxes

Tony:
Went

Ashley:
Down. Okay, cool. And I was just like, I think you should ever come here anymore.

Tony:
A little bit more than

Matt:
That.

Tony:
I’ve never seen that box before. Let’s see what it does. You definitely don’t want to hear it.

Matt:
We talk about sometimes people do the do-it-yourself TurboTax and it’s as good as the input you put in. So it’ll do whatever you want it to do if you answer the questions a certain way.

Ashley:
And he had even specifically asked when he called this place because his old accountant had retired when he called, he specifically asked, I have a rental property, do you do taxes with a schedule and stuff like that? And the person was like, “Yeah, yeah, yeah. No problem. Bring it in.”

Amanda:
And that’s the thing like Matt was saying, if you ask him, Hey, do you work with people who own real estate? The answer is always going to be yes. But then if you say, okay, what are your successful clients doing right now in real estate? And if their answer is, oh, well, one of my clients turned their home into a rental five years ago, then you know, okay, that’s who they determine as a successful investor. And if you are already way beyond, I’m renting out my home from time to time, then you just never want to be their biggest client or the one with all of the different questions and intricacies because then they’re just learning on you. So that’s the thing. We get clients like that sometimes where they come to us for real estate, but they also do manufacturing and they’re like, can you just do it?
Can you learn it? And I’m like, I’m saying no for your benefit. You don’t want me to learn manufacturing with you being the case. I

Tony:
Don’t want to do

Amanda:
That.

Tony:
So it sounds like when you shop for your CPA, it’s almost like in the medical field, how there’s specialists, you go to an orthopedic surgeon, you go to a cardiologist, you go to a neurologist, this, that, and the other. Is the tax strategy role the same way where you want to find someone who’s that niche down?

Amanda:
It’s so interesting you say that because that’s something I feel like we’ve been saying for so many years because we also teach pretty frequently at medical conferences and it’s so common. I’m a dermatologist and you’re a nephrologist and they all have their specialty, but then they work together. But in the tax world, no, very rarely do you have somebody who says, I’m a real estate CPA and I’m a manufacturing CPA because I think when we go through school, it’s like, well, you’re a CPA, you’re going to service everyone. And if you think of a traditional person starting out building their business, they’re going to take all the clients. It’s just money I’m not going to turn away. And I think that’s why, because in our society it’s so accepted that CPAs don’t specialize.

Ashley:
And too, it puts you, especially I feel like in my area, at least a lot of people go to their CPA to get their taxes done. They hire someone local where it’s harder. Okay, if you’re going to specialize on just this one niche, you’re very limited in your local area where if you’re nationwide, it’s a lot easier. But in my area, everyone goes very local too.

Amanda:
Well, that’s what even during our workshop today, one of the ladies came up afterwards and said, “Oh, I’m in X, Y, Z city. Do you have a CPA for me?” So I was telling her it’s not so much about being local, but you just want to find somebody who understands what you are doing. If it’s flipping, if it’s wholesale, if it’s rental real estate. Because also for real estate investors, we don’t always invest locally. People invest out of state where the cash flow is. So you need an accountant who understands multi-state, especially if you’re going to be in different locations too.

Matt:
And I think obviously post – COVID, it’s become a little more of a norm of working with people remotely. You send all your documents online. Moving the right direction, but there’s still the people that feel like they got to sit across somebody and prepare my.

Tony:
Your situation is actually a good thing to make sure that they check that

Ashley:
Box. Yeah,

Tony:
It’s a good thing. That’s got to be the scariest tax situation.

Ashley:
I mean, I did get an accounting degree, but I still feel like that wasn’t some degree I needed to know that that needed to be checked on that situation.

Tony:
What was the name of that tax firm? Was it like, we’ll figure it out together, tax firm LLC?

Ashley:
Honestly, I feel like it was like we got it or we get it.

Tony:
I’m pretty sure this is

Ashley:
Right. Well, Matt and Amanda, thank you so much for joining us today on Real Estate Rookie. Where can people reach out to you and find out more information about what you guys do?

Matt:
Well, thank you for having us. Super fun. Best place to find us is our website, which is keystonecpa.com. A lot of free resources on there and some good information.

Amanda:
Yeah. And you can find me mostly on Instagram, Amanda Han CPA. Try to put daily tax tips and financial tips as well to help people save on taxes, but also make sure we just make smarter money decisions.

Ashley:
Well, rookies, thank you for listening to this episode live from Orlando from BP Con 2026. We hope that you will join us for BP Con in 2027. You guys are missing out. I’m Ashley He’s Tony and we’ll see you guys on the next episode.