If you want to become financially successful, your first job is to learn how to acquire a lot of money. The next job that you have is to manage your tax liability.
Accelerate Deductions & Defer Gains
To do that you want to accelerate deductions and defer gains. What’s the perfect vehicle to accelerate depreciation deductions and to defer gains?
The perfect vehicle is real estate – particularly improved multifamily real estate. With an apartment building you’re allowed to take a deduction each year for the theoretical wear and tear or wasting of your building. When in fact the property may be going up in value you’re taking a write off on your taxes (what we call a non-cash loss) because of the theoretical wear and tear or depreciation.
That depreciation deduction can be used in particular by real estate professionals to offset and lower their taxable income from other sources. So real estate agents and other real estate professionals have almost an uncapped amount of losses that they can use against the earned income to make their tax liability as low as possible.