The Problem: Paying Too Much in Taxes Despite Owning Real Estate

As a high-income W-2 earner earning over $800,000 per year, this client was stuck in the highest federal tax bracket, meaning a large portion of his income was being taxed at a rate of 37%. Add on state taxes, and nearly half of what he earned was going to the IRS.

High earners often face limited access to deductions and credits that benefit lower-income taxpayers. Worse, many of the traditional tax-saving tools—like 401(k) contributions, HSAs, or mortgage interest deductions—barely make a dent once you’re in the top tax brackets.

That’s precisely why many wealthy individuals turn to real estate: not just for long-term appreciation or cash flow, but because when appropriately structured, real estate investments can be compelling for reducing taxable income.

Even though he had multiple rental properties and met the qualifications as a Real Estate Professional (REPS), he wasn’t seeing the tax benefits. His CPA at the time wasn’t doing proactive planning, so his real estate investments weren’t helping reduce his taxable income as much as they could have. He came to us looking for a better solution.

To make a real difference, your tax strategy must be personalized, proactive, and closely aligned with your income type and investment activities.

Our Strategy: Turn Tax Rules Into Tax Tools

Once he partnered with our firm, we built a proactive, investor-focused strategy tailored to his goals. Here's how we made the tax code work in his favor:

Real Estate Professional Status (REPS)

Typically, rental real estate is considered passive income, and losses from passive activities can’t offset W-2 income. But as a REPS, you can treat rental losses as non-passive, which means they can offset your active (W-2 or business) income.

He had already qualified as a Real Estate Professional based on the hours he worked in real estate activities, but his previous CPA hadn’t leveraged it. We ensured his status was documented correctly and utilized strategically to minimize taxable income.

Cost Segregation Studies

Instead of depreciating each property over 27.5 years, we used cost segregation studies to break down the building into faster-depreciating components (like appliances, fixtures, and land improvements).

This accelerated depreciation allowed us to front-load large deductions into the current year, creating paper losses that helped offset his income exceeding $800,000.

Passive Loss Reclassification & Grouping Elections

We grouped his real estate activities, which made it easier to meet the REPS material participation test. We also reclassified previous “suspended” passive losses from earlier years, allowing him to claim immediate deductions that his past CPA had left unused.

The Results

- $236,000 in tax savings in the first year - Significantly increased cash flow for reinvestment - Better portfolio structure for future tax efficiency

He was able to reinvest the saved money into additional properties, utilizing a compounding tax strategy that continues to benefit him year after year.

High Income Shouldn’t Mean High Taxes

If you’re earning a high income and investing in real estate—but still paying massive tax bills—you’re likely missing key strategies that could shift your financial trajectory.

This is exactly what we do.

We help business owners, investors, and high-income earners turn the tax code into a wealth-building tool. [Book Your Strategy Session Now]

Let’s put a plan in place to help you keep more of what you earn.