All Forum Posts by: Kevin Aumack

Hi Dan,

A short-term rental can generate losses to offset other investment income, but that depends on meeting IRS material participation tests. Actively managing the property may allow it to qualify as a trade or business, unlocking deductions. Consider the time and effort required, opportunity costs, and depreciation recapture when you sell. A 1031 exchange can defer those taxes, but they will come due eventually.

Hi James,

Tax strategy is incredibly complex. Even as a CPA, I still lean on my foundational knowledge to frame the right questions in ChatGPT; otherwise, you risk getting back strategies that look good but fall apart under scrutiny. If you don’t already have that base, you’ll end up chasing a lot of inaccurate advice.

Your time is best spent doing what you do best, not learning the ins and outs of every tax code nuance. That’s why you hire experts!

Regarding the $5K fee, ask for case studies or examples showing how their strategy has paid off for clients in situations like yours. You want clear evidence of ROI, not just a promise. And beware of someone who charges top dollar just to convert an LLC to an S-Corp without a plan for what comes next. If it were $5K per month, I’d definitely want to see significant added value or extra services before signing on.

Hope that helps!

Hi Yakir,

One thing to keep in mind: your property taxes will likely increase once you become the new owner. In many cases, the property hasn’t been reassessed in years and the current owner may be paying taxes based on an outdated value.

For example, they might be paying $2,000 a year based on an assessment from 2000. If the property hasn’t been reappraised recently, your taxes could jump significantly after purchase based on the updated market value.

Let me know if you'd like help estimating what your new property tax bill might look like. Also, others in the group with local experience may be able to chime in and offer insight on how reassessments are typically handled in that area.

Hi Keith,

Great question! This comes up a lot when trying to use short-term rental (STR) losses to offset W2 income.

While the IRS focuses more on who is actually doing the work (guest communication, cleaning coordination, pricing decisions, etc.) rather than whose name is on the account, having the materially participating spouse—in this case, the non-W2 spouse—listed as the host on Airbnb, Vrbo, and similar platforms can help strengthen your position if it’s ever questioned.

It makes the documentation cleaner and supports the story that this spouse is truly running the business.

Every situation has its own details, so it’s smart to confirm with a tax pro familiar with your setup.

Hope this helps!

Hi Jason,

To create a tax strategy that saves money, it really depends on your individual situation. Here’s a general example:

If you own rental properties and you’re actively involved in managing them, you may be able to use losses from those activities to reduce your taxable active income—like wages or business earnings.

Many people aren’t aware this is possible because the rules depend on how involved you are in those activities.

Hope this helps!

 Thank you for the clarification! That’s a major nuance.

 Hey Mike, 

I have just a general question about the bonus depreciation in this scenario. She would be able to take bonus depreciation based on the placed in service date (if the property type qualifies) rather then when it is acquired, correct?

It doesn't look like you'll be able to deduct those extra losses under your current setup. Since you're not a real estate professional (REP) and not operating a short-term rental (STR) with material participation, you don't meet the tests to treat losses as non-passive.

Active participation is a lower bar than material participation, but with full property management in place, it’s unlikely you'd qualify, unless you're still involved in key decisions like approving tenants, setting rents, or authorizing repairs. If you're completely hands-off, the IRS may say you don’t “actively participate.”

That said, depreciation is still valuable. Even if the passive losses get suspended, you’re reducing your current taxable rental income and deferring taxes, which gives you the benefit of time value of money. Those suspended losses also carry forward indefinitely and can offset future passive income or be released entirely when you sell the property in a fully taxable sale.

If you're really looking to tap into those extra deductions, you'd need to make a shift in strategy; like taking a more active role (for the $25K active participation allowance, assuming your income is under $150K) or converting to an STR with material participation. But both of those involve trade-offs and more involvement, which may defeat the purpose if you want this to stay passive.

Hope that helps clarify things.

Hey! Cost segregation can be worth it. 

When you inherit a property, you get a stepped-up basis, so your depreciation resets. This means you can accelerate deductions with cost seg and 100% bonus depreciation.

That said, whether you actually benefit depends on your involvement with the property. If you’re not actively managing it or don’t qualify as a real estate professional, those extra deductions might just be passive losses you can’t currently use. The excess depreciation will carry forward until you have passive income.

Also, if you plan on putting money into fixes or improvements, it’s usually better to do those before the cost segregation study so the new basis includes them.

Bottom line: cost seg can be a great tax tool, but its value depends on your personal tax situation and activity level. Happy to help if you want to discuss your specifics!

— Kevin, CPA

A few quick thoughts if you're considering pulling $100K from a retirement account:

Withdrawals should be the last resort.
You'll likely get hit with ordinary income tax (let’s say ~25%, depending on your bracket), plus a 10% early withdrawal penalty if you’re under 59½. That’s roughly a 35% haircut off the top.

Alternative option: 401(k) loan (if your plan allows it).
You’d avoid the 10% penalty and defer taxes while paying yourself back with interest. It's not perfect, but it can buy you time and flexibility if done right.

Offsetting the $100K with rental losses? Probably not.
Unless you qualify as a material participant, rental income is considered passive. Passive activity losses can’t offset active income like a retirement withdrawal. Excess losses just carry forward until they can be used.

Using SDIRAs or Solo 401(k)s to fund a note with relatives? Be careful.
Loans or deals involving disqualified persons (like your parents, kids, or spouse) are considered prohibited transactions by the IRS. Not worth the risk without expert guidance.

Hope this helps weigh your options. Happy to clarify anything further if it’s helpful