Thread by @money_cruncher

You could legally pay $0 in federal taxes even on $300,000 of W-2 income.

And the new tax bill just made it a lot easier.

Here's how to take advantage of this:

The new tax bill made a massive change:

100% bonus depreciation for property placed in service after January 19, 2025 instead of 40%.

This allows for big tax savings for real estate investors.

Say you bought a rental property on June 30, 2025 for $400,000 and performed a "cost segregation" study.

Out of the $400,000, ~$320,000 would be allocated to building basis.

With cost seg, of that $320,000, ~$96,000 would qualify as bonus property (5/7/15-year property).

With the new tax bill, this means you can 100% bonus depreciate that in the first year.

So, year 1 depreciation expense will be ~$100,000.

Add mortgage interest, property taxes, management, cleaning, and utilities, and you can get ~$120,000 of expenses in year 1.

If that rental generated $24,000 of rental income (for half year), you will get a ~$96,000 net loss.

Of course, this loss is a passive loss. You can't take it against your W-2.

BUT there are 2 main strategies to change that:

2 main methods real estate investors use to "convert" passive losses into non-passive:

1. Short term rental strategy

2. Real estate professional status

Let me explain...

1. Short-term rental

If the average customer stay is less than 7 days (e.g Airbnb) and you materially participate in the rental business for at least 100 hours (and more than anyone else), these losses can be taken against your active income.

For example, if you made $300,000 of W-2 income and are single, you would reduce your federal taxes from ~$70,000 to ~$38,000 with that $96,000 net loss in year 1.

That $32,000 in tax savings can be used for other investment opportunities.

2. REPS status

If you don’t want to do a short term rental due to the risks, your other option is REPS status (750 hours in real estate and more than 50% of your time spent in real estate ).

Full-time W-2 employees wouldn't qualify, but your stay at home spouse could.

Now, when you sell this rental, you will face a depreciation recapture.

Here are 5 strategies to lower the impact:

> pass away and give the rentals to your children
> 1031 exchange
> direct indexing to do tax loss harvesting
> installment sales
> opportunity zones

You have to plan whether it makes sense to take this huge loss in Y1.

If you are in the 22% marginal rate but expect to be in 32-37% soon, it may not make sense to take the loss now.

But if you are in the 37% rate and expect to be in a lower bracket, it could make sense.

If you liked this breakdown, please:

1. follow me @money_cruncher for more CPA tips

2. scroll up and repost the first post, so others can learn about this