Client Success Story: Using Depreciation to Your Advantage

Using depreciation to your advantage:

Today we will be sharing tax accountant Reid Donaldson’s recent client success story. Reid’s client had a portfolio of investments that was heavily weighted in real estate. Real Estate is an asset class that not only generally generates a good monthly cash flow, but also can spin-off a significant amount of tax loss. While real estate generally appreciates economically, for tax purposes it can be depreciated. 

In part because of significant depreciation, Reid’s client had passive tax losses from his real estate activities totaling $90K. This client was a business owner that generated a significant amount of income during the year placing him in the top tax bracket. Reid was able to identify a way for the client to create passive income, which could be absorbed by the passive losses from real estate. This creative solution ended up saving the taxpayer $25K this year alone. While the tax savings are clearly the biggest benefit, the added bonus is that this structure does not cost the client anything to maintain and does not overly complicate for years to come.

Great Job Reid! Interested in using depreciation to your advantage? Reach out to Tembo CPAs today and see how we can help!