Modern Tax Shelters- the Continuing Power of Real Estate Tax Breaks

“Tax reform”, back in 1986, killed the real estate tax breaks so soundly that most of us don’t even remember how sweet they were anymore. Many taxpayers (and their advisors) incredibly still don’t know about the “real estate professional” loophole that opened up in the early 1990s, and that’s a darn shame for those of us that have amassed a bit of a real estate portfolio, whether business property, or commercial or residential rentals. In the right fact pattern— you have a spouse who has the time to spend, say 15 hours a week ostensibly looking after the real estate (keeping books, checking ads, painting or directing the painters, whatever) and is not doing much else occupationally—you get most of the old real estate write-offs back and can net them against your other income, possibly saving a huge slug of tax. If you have real estate besides your home, are frustrated by the post-1986 “passive loss” rules, and have a willing and able spouse, you really need to get a second opinion on this (Camarda has an endless supply of them).
And make no mistake, what you have heard about real estate investing being responsible for more millionaires in the U.S. is probably true. If you are careful, patient, and willing to spend some time, it can be a very effective and tax advantaged way to build wealth and ongoing income.