This popped up on my feed. I am a CPA and this is COMPLETELY WRONG on so many of his points. Did not take into consideration land is not depreciable. There is no 7 year front-loading (audit written all over it). And you have to qualify to offset against ordinary income as a full-time real estate professional. Not to mention depreciation recapture rules.

You in court: “As my own legal representative, I submit this Reels clip as evidence A that I am innocent.”

Listen to this guy and get audited every year

As a tax accountant, this guy is totally wrong!!!!

I haven’t paid taxes in 25 years and it’s so simple. Start an LLC, then everything is a write-off. Your LLC “loses” money for 2 years (IRS allows 2 years of losses). Then you close it and open another one, then rinse and repeat…you’re welcome…good luck 😬

You can only depreciate what the actual house is worth. Not the land. If you bought this property for $575K you have to back out what the land is worth before calculating depreciation.

I've noticed that classes over how to make money in real estate become really popular right before the bottom of the market drops out.

IRS will Recapture depreciation when that house gets sell

Depreciatin that wall.

This is entirely wrong

Why do the amateur real estate kids try to explain tax strategies ? Leave it to the CPA’s

This guy will get you irs audit.

Good luck as property taxes increase every year / appreciation.

Ask him about recouping depreciation

Don't forget that depreciation recapture is ordinary income

Understand this and you will be ok. You can not beat the irs. You can play with them, but you can not beat them.

Depreciation is a phantom deduction, you should explain that the capital gains tax will be much higher if they sell that rental after taking the depreciation.

You have to pay back depreciation when you sell the property

Land value is not depreciated, only the structure value is over 27.5 yrs.

This guy has some of the most interesting takes on real estate. I've listened to bigger pockets, grant cardone etc. But this dude has some WAY different strategies

Simply said: you benefit from the depreciation and IRS loses; you sell the property and the IRS benefit through capital gain tax, you lose.

debt, assets, depreciation, renting, and refinancing. this is how a large majority of the 1% operate. they don't cheat their taxes. they utilize methods like this to keep their taxes at 0. it's not illegal it's just smart. this renter method, they just keep buying the properties they need to buy every year to keep their depriciation high enough to cancel the income amount they gain from renting, they live on the remainder of that money (that's not paying off the loans), then they take more loans out against their assets to buy more. loans are tax free. loan buy thing, thing pays off loan, depreciation cancels income tax from thing. that's one of the most traveled roads to the top 1%. it's not terribly hard. all it requires is knowledge, a good credit score, and enough for a down payment on your first asset. (clearing your record of bad debt first is optimal)

Please speak with a CPA before trying this. You need to know that there is a catch and there are several variables you'll need to consider. It's more complicated than explained here and you could be out a lot of money if you're not well informed.

Passive vs active snd where are you getting 7 years. MAcc degree and own a tax firm. Reporting this post. It’s misleading in many ways. Plus depreciation has to be recaptured and passive losses have limitations. Learn tax if your going to explain tax on social media.

While this is a rule of the IRS. It's a rule that is forced down the throat of the IRS by special interest groups.

Change ur passive income into non passive and make sure you are materially participating to use the depreciation

The IRS only allows depreciation on the improved property value, not the land value. Subtract the land value from the total $575K purchase price, then calculate the 27.5 years depreciation.

Yea not actually how that works but keeping the dream alive lol

Hey Pace! HUUUGE FAN! Love your new book full of valuable information $$$ Will you please let me know if the bonus depreciation phasing out affects the 7year accelerated depreciation strategy that you utilize? Thanks in advance !

You have to recapture at capital gains rate when you sell, it works great until you sell.if the house actually appreciates over time(which it will), after the 27.5 years when it's fully depreciated, you're taxed on the whole selling price. It's the logic of the tax deferred IRA, hopefully you'll be in a lower tax bracket in the future. Unfortunately if you're an aggressive investor, you will be in the highest tax bracket when you retire.

I love how the internet has made the IRC intriguing.

In South Africa, Municipality revalue your property every 4 years normally at a higher price. This higher valuation increase your Rates and Taxes and Sewer charges.

Not all of the 575k will be depreciable. That 575k will include land, which isnt depreciable. You will need to allocate 575k between the land and the bldg.

1 house for 7 tax breaks, sounds legit lol

7years upfront is bs.

It's always way more complicated than how these gurus explain it. This is a common practice for those who own industrial and/or commercial real estate. There's a reason why you see industrial and commercial buildings that are abandoned for years. In certain cases a municipality can force the owners of those estates to tear down the building and/or force them to sell the property. It's rare but can happen.

When you go to sell this property in the future, the IRS will recapture your depreciation and you’ll have to pay that tax benefit back. You may think you’re going to keep a property forever to avoid it, but you don’t know what your life looks like in 5, 10, or 30 years.

Another great video! With great content like this for free why by the mentorship?

What the heck is a tax benefit? Is it a rebate or a credit? Why does my accountant not know this shit?

Folks, just remember, alot of this applies to full tike real estate investors. Not if you are a w2 employee earning above a certain income. Alot of this changed when the last tax reform passed. Make sure you do research or consult a tax preparer with this kind of expertise.

What no one tells you that when you sell the property you have pay a depreciation recapture tax. That’s anywhere from 20-40% depending on your income bracket and the profit on the deal.

The smartest real estate investors try to pay more taxes not save on taxes. If u know u know.

This is why the tax code needs to be fixed and also why it won’t ever be fixed. Some people will take advantage and don’t want it to go away until it pops the bubble

As someone with over $200m in CRE this is almost painful to listen to. No discussion of recapture? Or the fact you only depreciate the value of the structure? People act like depreciation is free money.

Nearly 21 grand for Home Alone? No wonder my parents brought the sequels.

You can't offset passive losses against ordinary income. And you have to "recapture" depreciation when the house is sold.

Can w2 employees who own homes somehow get these tax benefits?

The painters Donna be pissed when he has to cover that sharpie all over the wall.

If you claim the 7 years up front, do you have to keep the house for 7 years? If you can sell, does the new owner have the option to do the same?

Ahh yes. The bubble is real

When you do this you pay a huge capital gains tax when you sell the house.

You MUST do a cost segregation analysis with an engineer in order to apply that write off

The reason you don’t pay taxes is because all your money is in offshore bank accounts🤣

Can’t depreciate the land, but close enough.

Also talk about Depreciation Recapture..instead of just misleading people

... and for subsequent years... it all falls apart. So you sell it before it does. That's called handing your customer a 💩.

depreciation recapture

Your depreciation is ONLY on the house and NOT the land. Also, it's over 27.5 years of depreciation.

If you claim depreciation you have to pay more taxes on the appreciation when you sell it later

Yeah imagine you have a big plant style estate 4%~7% annually depending on the use

All businesses don't pay taxes on net profit - customers pay all taxes.

how do I calculate the rental property’s value to depreciate when I built in on land I already owned? Use what i spent/ order appraisal?

Who is going to paint over the marker pen on those walls?

There’s book that explains about business entities and taxes, youd know what he’s talking about if you read it

Also, on a top, you can do aggregation.

ahhh not right, depreciation and maintanence is not the same. Also, you only depreciate the dwelling and not the land,, also you pay back the depreciation when you sell (this part gets complicated) It is 100% worth renting out houses, but don't think it's that simple

So what you're saying is on that 575K house you pay property taxes of 19K which is offset by nothing. The offset is for your income taxes which means for the first year when you pay points of 22K in purchasing said house you can not pay income taxes for that year but can pay all the otehr taxes(40K with points). Gee that seems like a great deal for those making no income.

He’s talking Amy cost seg I think. Those are not cheap

Best explanation I’ve heard. God bless you Pace

Can i use the depreciation against 1099s that i will get when i get all my credit debt charged off?

Actually he's wrong. That tax depreciation applies to business that utilize equipment that go down in value, not your home. Furthermore, he's talking about only one type of depreciation there are several.

Wish we could do that in the UK 🇬🇧

Ik all you are are watching to learn, but i just wnna know why hes useing sharpy on the wall 😢😂

Pssstt someone ask him what happens when you sell the house and watch him squirm explaining that if you just refinance 97 times you’ll never need to sell. All jokes aside, if you are going to hold it until you die, and wrap it into a trust where the basis gets stepped up, it’s a fine idea. *not a tax professional*

You add it back when you sell it

Let me introduce you to recapture.

Can we start including the second half of this story about depreciation? Depreciation recapture taxes are not commonly known. Telling people how to avoid taxes through a quasi-temporary solution is dangerous advice. Consumers will pay taxes on this when they sell, if they do, unless they execute a qualified 1031 exchange - which many consumers mess up and negate the tax benefits of a 1031 exchange.

What happens the next year , no tax benefit, till the 7th year has passed, a lot can happen in 7 years be careful

I’ve watched multiple times don’t understand lol where does the 7 come from he said $7000 the first year, you can’t get or use $104,000 the first year? I’m missing something

Run.

You’ll pay a bunch of capital gains when you sell though. You’ve been lowering basis over the years.

So how do you get the tax benefit?

Damn. Someone should you just post the whole entire IRS depreciation code here 😂

You cannot use passive income to wipe out taxes on earned income

our system is currupt. We need to abolish the irs and stop having to find accounting tricks to make it through life.

Do we necessarily need to buy a property under LLC to get those tax benefits or we can buy under individual name?

Heres the cool thing he gets to take that money and never do the maitenance thats why were selling 50 year old mold buckets for 2.2 million dollar's....

My house is almost a century old. City taxes my property at 120 percent of its worth. Tell me something different.

Which section of the code permits such?

So I’m assuming this is only for rental property?

I bet if you sell it within those 7 years you have pay it back.

Weird white board.

What rule is this?

But depreciation gets maxed out for taxes

And you pay it all back when you sell it. It is called capital gains. Do not depreciate it. Stick it in a trust.

If you sell that house for more than the depreciated value you will be paying back that money with interest/penalty. Good luck slick Rick.

I don’t get a cent for owning a home

These tactics shouldn't even be necessary. We live in a corrupt world, though. So fight them by refusing to pay and fight their consequences or use dirty tricks that the majority can't do. We need to stand up and push back. They give our money away to other countries and make more money off it. Meanwhile, we are falling apart due to their actions.

I swear next time I hear someone using the words reason and why in the same sentence my head's gonna explode!

One word: recapture