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Tax, SDIRAs & Cost Segregation

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Monil Shah
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What Real Estate strategy works to get tax benefit on 401k Salary

Monil Shah
Posted Jan 18 2024, 15:51

I have been hearing a lot about strategy where by getting into real estate one can benefit on tax deductions on high income 401k salary.
How does it work?

What real estate strategy works to our benefit ?   How do you go about it ?

Assuming I cannot manage the property full time and will be using property managers 

I am considering short term rental and buy-flip strategies

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Sean O'Keefe
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  • CPA | California
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Sean O'Keefe
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  • CPA | California
Replied Jan 18 2024, 21:26

@Monil Shah This question(s) is confusing and all over the place. It also feels like you've mixed a lot of the tax strategies up. 

You need to rewrite this post with clearer and more concise questions OR schedule a consultation with a Real Estate CPA who can take you through the core concepts around Real Estate tax strategy. 

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Monil Shah
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Monil Shah
Replied Jan 19 2024, 00:16

Thanks, I'll try rephrazing the question

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Basit Siddiqi
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  • Accountant
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Basit Siddiqi
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#4 Tax, SDIRAs & Cost Segregation Contributor
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Replied Jan 19 2024, 11:35

In my opinion, a lot of taxpayers get fixated on the fact of offsetting W-2 wages with rental losses but forget that rental cash-flow and rental appreciation can grow tax deferred which is great wealth accumulation.

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Sastry Srini
  • Canton, MI
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Sastry Srini
  • Canton, MI
Replied Jan 19 2024, 12:25

@Monil Shah 

Just to be clear, if you are on W-2 income, 401k is way to reduce your taxable income to save for retirement. The IRS allows you to borrow up to 50% of your vested 401(k) retirement savings, with a $50,000 cap.

The rental income is considered passive and can only be offset by passive losses. 

It is a good idea to consult a tax planner to see what fits your situation. 

If you have a self-directed IRA funds, that can be used for investing in real estate. I don't have full details of it. Hope this helps. All the best