All Forum Posts by: Jason Malabute

Great question — and it’s great that you’re thinking strategically about using real estate to offset W-2 income.

To create paper losses through depreciation, it depends on several factors — especially the property type and how much of the purchase price can be allocated to depreciable components through a cost segregation study. These typically include personal property and land improvements, which are eligible for bonus depreciation.

Also, just a quick correction: for 2025, bonus depreciation is currently set at 40%, not 20%. It’s been phasing out each year since 2023.

Depreciation timelines also vary depending on the property’s use:

• Residential rental property is depreciated over 27.5 years.

• Commercial property is depreciated over 39 years.

• And here’s an important nuance — if you’re using the property as a short-term rental (i.e., average stay is less than 7 days and you materially participate), it’s not considered residential under the tax code, so the default depreciation period is 39 years, not 27.5.

Because of all these variables — including how much can be allocated to bonus-eligible assets, the type of property, and how it’s used — there’s no one-size-fits-all estimate for how much real estate you’d need to acquire to generate $200K in paper losses. It really depends on the specifics of the deal and structure.

One of the best ways to find someone reputable for a cost segregation study is to ask other real estate investors who they personally use. If you’re part of a local real estate meetup group in Cape Coral or elsewhere in Florida, definitely ask around there. A lot of us rely on word-of-mouth referrals from trusted investors we know. That’s how I’ve found solid vendors in the past. Happy to connect you with a few folks if you’re still looking!

If the property is owned in your personal names and not by the LLC, reporting on Schedule E is correct. A net income of $2k could easily result in additional tax depending on your overall income and tax bracket. Rental income is taxed as ordinary income, and while depreciation helps reduce taxable income, it may not fully offset it. Make sure you're taking all eligible deductions (depreciation, mortgage interest, property taxes, repairs, etc.). Moving the property into the LLC won't change how it's taxed unless the LLC

There are several ways real estate investors significantly reduce their tax liability, but it really depends on your specific situation. Strategies include things like cost segregation, bonus depreciation, regular depreciation, qualifying as a real estate professional to offset active income with passive losses, and short-term rental tax strategies.

It’s hard to list everything without knowing your income mix, goals, and how involved you are in the properties. I’d recommend looking into becoming a tax strategist developer—someone who understands how to structure real estate investments specifically for tax efficiency. It can make a major difference.

Just a quick thought—since you mentioned you’re using mysolo401k.com, it might be helpful to reach out to your rep over there and ask if they can recommend a CPA who’s familiar with these specific overcontribution and conversion scenarios. They likely work with CPAs who regularly help clients navigate these issues.

You generally can’t use the de minimis safe harbor to deduct expenses like furniture if those costs were incurred before your short-term rental is officially placed in service. For example, if you buy the furniture in April but your rental doesn’t start operating until May, those expenses wouldn’t qualify under that rule.

If you expect to be in a higher tax bracket in the future, converting to a Roth IRA now could make sense—especially if your current tax rate is 0% due to low income or business losses. Roth is taxed now, Traditional defers taxes. But keep in mind: while business losses can offset some of the tax from a Roth conversion, there are limitations.

Hey Jacob, sounds like you’ve done your homework — that’s great. If you lived in one unit as your primary for 2 of the last 5 years, you may qualify for the Section 121 exclusion on the portion you lived in.

Based on what you shared, here are a couple of “gotchas” to watch out for:

1. Use Test & Ownership Test – You need to have owned and lived in the property as your primary residence for at least 2 out of the last 5 years before the sale. Sounds like you meet that, but double-check the exact dates.

2. Rental Period & Depreciation – The time it was rented doesn’t disqualify you, but any depreciation you took on the rented portion has to be recaptured (taxed) when you sell. Also, the exclusion only applies to the portion you lived in, not the entire duplex.

Hey Nick,

Just a heads up — we’re not allowed to make direct referrals or promote services on this forum (BiggerPockets rules), so I can’t name specific firms. But a simple Google search like “CPA for real estate investors in California” should give you a good starting point.

Also, when you mentioned you have bookkeepers, I’m guessing they might be offshore? If you’re not a CPA or trained in accounting yourself, there may be things getting missed — simply because you don’t know what you don’t know. That’s totally normal, but it’s important.

When you do find a CPA, make sure they’re doing more than just plugging in numbers. They should review your books, clean things up if needed, and ensure everything is categorized properly. Bonus points if they specialize in real estate — that way you’ll know you’re maximizing your deductions and taking advantage of all the tax strategies available to real estate investors.

Yes, you can deduct special assessments on your tax return if the property is a rental.

• If you’re on cash basis, deduct what you actually paid during the year.

• If you’re on accrual basis, you can deduct what you accrued, even if not yet paid.

Make sure the repairs aren’t considered capital improvements—those would need to be depreciated instead.