Episode 11: How Bonus Depreciation Impacts Paper Losses & Asset Prices

Host: Casey Silveria

Guest: Thomas Castelli


Thomas Castelli is a partner at The Real Estate CPA, a firm specializing in tax and accounting services for real estate investors. He discovered his passion for real estate investing while reading the Rich Dad Poor Dad book in college and became a mentor in a local REIA. Thomas invested in multi-family deals as a limited partner before becoming a general partner in an 1800-unit apartment complex in Florida. He then joined The Real Estate CPA and now advises investors on tax strategies for real estate investments. One of the most significant tax strategies available to real estate investors is the ability to use passive losses to offset income and gains from passive activities, such as rental real estate. This involves monitoring passive losses on form 8582 of the tax return, considering the flows of income from K-1s received from limited partnerships, and when the sponsor plans to sell. Depreciation is another non-cash expense that reduces taxable income but not necessarily cash flow. Investors can take advantage of bonus depreciation, which will phase out over the next few years, allowing them to depreciate the building within the property over 27.5 years, with different depreciation periods for components such as land improvements and five-year property. Thomas emphasizes the importance of timing and passive losses for real estate investors to reduce taxes on rental income and gains from property sales. He cautions against sponsors who promise tax benefits as the main selling point, urging investors to focus on the fundamentals of the investment. Thomas also provides resources for listeners to learn more about tax strategies for real estate investors through The Real Estate CPA.

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Key Points: Real Estate Taxes, Tax Benefits

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