A Big Write-Off Is Not the Same Thing as a Usable Write-Off

[William Thompson]

Lately I’ve been hearing the same thing from investors:

“If I do a cost seg and create a big loss, that should crush my tax bill, right?”

Maybe. Maybe not.

This is where a lot of people get tripped up.

A big paper deduction does not automatically mean a big tax benefit this year. If that loss is stuck on the passive side, or your income is too high for the exception people keep talking about, that write-off may not do what you thought it would do right now.

That’s why I keep telling investors the same thing:

Before you chase the deduction, ask whether you can actually use it.

Sometimes cost seg is absolutely the right move.
Sometimes you just created a loss that looks exciting on paper and sits there.

That’s not bad planning. That’s incomplete planning.

Curious how many investors here have seen people get excited about the size of the write-off before asking whether it was actually usable?