All Forum Posts by: William Thompson

Ever wonder how some real estate entrepreneurs scale faster — even without making dramatically more money?
They’re not just working harder; they’re working smarter with the S-Corporation tax strategy.

But before we dive in, let’s clear one thing up:
*This only works for active income.
That means flipping, wholesaling, commissions, construction, or property management income.
It does not apply to rental properties or long-term passive investments — and putting rentals inside an S-Corp is one of the worst tax mistakes you can make.

Let’s break it all down:

Step 1: Why the S-Corp Exists (and Who It’s For)

An S-Corporation (S-Corp) is not a special type of company; it’s a tax election.
You can form an LLC, then elect for it to be taxed as an S-Corp.

It’s perfect for people earning active income — anything where you work for the money:

-Flipping houses

-Wholesaling deals

-Real estate commissions

-Property management fees

-Contracting or construction

Here’s why:

• A sole proprietor or regular LLC pays self-employment tax (15.3%) on all net income.
• An S-Corp lets you split your income between:
  a “reasonable salary” (subject to payroll tax)
  and “distributions” (not subject to self-employment tax).

That simple shift can easily save five figures a year once your business income hits the six-figure mark.

Step 2: How the Wealthy Use It to Build Explosive Wealth

Here’s the play wealthy entrepreneurs use again and again:

1. They pay themselves smart, not just more.
   Set a reasonable salary — what the IRS expects for your role — and take the rest as distributions to cut payroll taxes.
2. They reinvest the savings.
   The extra cash that would’ve gone to taxes gets redeployed into more flips, marketing, or acquisitions — compounding their growth.
3. They hire strategically.
   Many bring family members into legitimate roles, shifting income and creating generational wealth legally.
4. They layer entities.
   Example:
   • S-Corp runs the active business (flipping / wholesaling / management).
   • LLCs hold the long-term rentals.
     That separation protects liability and keeps tax treatment clean.

Why S-Corps Don’t Work for Rental Properties

Here’s where many investors go wrong — using an S-Corp to hold rentals. It’s a tax trap for a few big reasons:

Distributions Trigger Taxable Gain:
You can’t move or distribute appreciated property out of an S-Corp without paying capital gains and depreciation recapture. That means even transferring the property to yourself can trigger a tax bill.

No Basis from Debt:
S-Corp shareholders don’t get basis credit for company debt, which limits depreciation and loss deductions on rental properties. If you have leverage, you'll lose valuable write-offs that an LLC structure would preserve.

In short:
-Keep rentals in LLCs.
-Use S-Corps only for active income.

That’s how the wealthy keep their entity structure simple, efficient, and IRS-proof.

Bottom line:

-Keep rentals in an LLC.

-Use S-Corps for active income only.

That’s how the wealthy keep their strategies clean and scalable.

Step 3: Why 2025 Made S-Corps Even Stronger

The 2025 “One Big Beautiful Bill” permanently locked in several huge advantages for S-Corp owners:

- The 20% Qualified Business Income (QBI) deduction is here to stay for pass-throughs.

- Interest deduction limits are back to EBITDA-based — allowing bigger write-offs for business financing.

- And pass-through entities like S-Corps continue to enjoy lower effective tax rates than C-Corps.

Combine that with self-employment tax savings, and it’s easy to see why most successful flippers, agents, and wholesalers use this setup once income grows.

Example (Simplified)

Say your wholesaling business nets $200K this year:

Without S-Corp:

• You pay 15.3% self-employment tax on $200K = $30,600

With S-Corp:

• You take $90K salary, $110K distribution
• SE tax only applies to the $90K salary
• You save roughly $16K–$18K per year in payroll tax
• Plus, the 20% QBI deduction on part of your income

That’s money you can pour right back into scaling — the real secret to how wealthy investors accelerate growth.

The Rental Reality Check

If that $200K were from rental income, though?
The S-Corp wouldn’t save a dime — in fact, it would cause problems. You’d lose 1031 flexibility, invite double taxation risk, and make it harder to pass properties to heirs.

The Big Picture

Wealthy investors don’t just make money — they keep it.
And one of their biggest tools for active income is the S-Corp election.

- Flipping? Use it.

- Wholesaling? Absolutely.

- Managing properties for others? Perfect fit.

x Long-term rentals? Keep those far away.

That’s how the pros build, scale, and protect their wealth — one structure at a time.

Your Turn:
Do you already use an S-Corp for your active real estate income?
Or are you still deciding when it makes sense to make the switch?

Let’s compare notes — the right setup can easily be worth thousands a year in saved taxes and cleaner structure.

Both of you make solid points — and honestly, it comes down to the numbers.

@Collin Hays, you're right — condos can crush returns if HOA fees or special assessments spike.

@Chris Watson, also true — I’ve seen beachfront and amenity-heavy condos outperform nearby homes when the buy-in is right.

From a tax view, condos often win short term because less land = more depreciable assets under the new bonus depreciation rules. But single-family homes can still compete if land value is low or outdoor improvements are high.

Bottom line — it’s not “condo vs. home,” it’s after-tax cash flow vs. headaches. The real winners do the math, not the myth.

Ever wonder which gives you more tax power — a condo or a single-family home?

With the 2025 “Beautiful Bill” officially bringing back 100% bonus depreciation, this question just got a whole lot more interesting.
Here’s the real talk from a CPA’s perspective:

Condos often have the edge.
Because you don’t directly own the land, more of your purchase price goes toward “depreciable stuff” — like appliances, flooring, lighting, and fixtures that can be written off right away.

Houses can still win.
If the land value is low or there are big outdoor improvements (pool, driveway, fencing, etc.), those can also qualify for bonus depreciation.

Key move: Do a cost segregation study. It breaks your property into short-life assets that qualify for 100% write-off under the 2025 law. That’s where investors are unlocking massive first-year deductions.

Curious how others here see it:
Have you tried cost segregation on a condo yet?
Did it give you a bigger write-off than your single-family deals?
Let’s compare notes — I’m seeing some surprising numbers this year.

2025 is shaping up to be one of the biggest years for real estate tax planning.

The new tax bill quietly changed a lot — some great news, and a few traps to watch out for.

Here are the big ones investors should know:

• 1. 100% Bonus Depreciation is back — permanently. If you’re renovating or buying, this can mean huge write-offs in year one.
• 2. Section 179 limit jumped to $2.5M. Perfect for active investors upgrading properties or equipment.
• 3. 20% QBI Deduction stays. Pass-through businesses (LLCs, partnerships) still qualify — but structure matters.
• 4. Interest deduction rules improved. Real property trades and businesses keep favorable treatment.
• 5. Opportunity Zones extended. Now easier for rural investors to qualify.
• 6. SALT cap raised to $40K. Big win if you’re investing in high-tax states.

My advice? Don’t wait until filing season to plan.
This is the year to front-load improvements, run cost segs, and review your entity setup.

I’m seeing too many investors miss out on easy deductions just because no one told them what changed.

What’s your biggest tax question going into 2025?
Happy to break it down for anyone here 

Jay,  Totally fair point — you’re right that underwriting can vary a lot from lender to lender. My comment was meant to explain how DSCRs are typically structured on paper, but you’re absolutely right that some underwriters still treat PG-backed loans as contingent liabilities in practice.

Every tax season, this question comes up over and over:

“Can I write this off now, or do I have to depreciate it?”

Here’s the quick rule of thumb I share with clients:

If it’s a repair (fixing what’s broken or keeping things running), you can usually deduct it right now.

If it’s an improvement (something that adds value or extends the property’s life), you’ll have to depreciate it over time.

So… patching a roof = deductible repair.

Replacing the entire roof = depreciable improvement.

And with the 2025 tax rules, certain property components (like appliances or flooring) might even qualify for 100% bonus depreciation if you do a cost segregation study.

Curious how everyone here handles it — do you separate repairs vs. improvements yourself, or just hand it all over to your CPA at tax time?

That’s a great question — and you’re absolutely right to dig deeper on that.

With most DSCR loans, the key difference is that while you sign a personal guarantee, the loan itself is typically made under an entity (LLC) and isn’t reported to the consumer credit bureaus unless it defaults. It’s still legally binding, but it won’t show up on your personal credit report the way a conventional loan would.

As for the title and tax side — yes, anyone can verify a mortgage through public records or tax filings, but that doesn’t automatically tie back to your personal credit profile. The IRS and credit bureaus don’t share that kind of direct reporting link.

It’s one of those “behind-the-scenes” structuring advantages that can help investors scale — as long as it’s done right.

Glad to hear that! 🙌 Here’s my calendar link so we can set up a quick chat: https://meet.reaccttaxpros.com/discovery.

We can go over your current setup and explore a few ways to strengthen your strategy — no pressure, just a helpful conversation. Looking forward to connecting soon!

We can go over some quick strategies that might benefit both you and the people you refer — no pressure, just a good conversation about what’s working right now for investors. Looking forward to connecting!

Good morning! Great choice narrowing down to OKC — it’s one of those markets that’s still affordable but has steady job growth and rental demand. Smart move looking for local insight before jumping in.

I’m not an agent or PM there, but I work with quite a few investors who buy out-of-state (including Oklahoma) to make sure their setup — entity, taxes, and financing — supports long-term scaling. A lot of out-of-state buyers miss that part when they start, and it ends up costing them later.

If you’d like, I can share a quick checklist I use with my clients before they buy out of state. It’ll help you avoid a few common (and expensive) mistakes early on. Want me to send it over?