Matt MacFarland and Amanda Han are founders and directors at Keystone CPA. As tax strategists and real estate investors, they combine their passion of investing with their expert knowledge of tax strategies. They’ve got expert tips to save you big money on your taxes while leveraging your real estate investments. 

Why most people hate doing their taxes:

“I think a lot of that is actually probably overly exaggerated, but I, I think that’s kind of where the fear comes from, is the advisors. Yeah. And I think it’s also too, a lack of knowledge, right? People just don’t understand it, obviously it’s complicated, but I think they fear what they don’t understand.”

Why entrepreneurs need to find the right accountant:

Robert Kiyosaki famously said, ‘It’s not about how much money you make, it’s about how much of it you actually get to keep.’ And working with the right advisors, whether it’s tax or even legal. Those are the people on your team that help you keep a lot of your money. I think entrepreneurs are good at making money and if you’re not someone who’s also well versed in how to keep it, then it’s important to have an advisor who understands how to best maximize the law to your advantage.”

Real estate depreciation as a tax benefit:

“I like to say depreciation expense is probably like the ninth wonder of the world. Because you know, you’re going to go out and buy stocks, right. The IRS doesn’t get to let you write off the cost of the stock when you buy it. You don’t even get to write that off until you sell it down the road. But with rental real estate, we can buy real estate. They let you take a paper expense, a paper write-off every year, against your cash flow you get from that property. So, it could be cashflow positive in your pocket, but we’re not paying any taxes on it. And, maybe with enough depreciation we’re creating losses that we can use to offset other income. It’s just one of those beautiful things in the tax world that you don’t get in a lot of other asset classes.”

Some real-estate tax strategies we can all use:

“The ultimate goal we would like to get to for investors is to use real estate, not just to offset rental and passive income, but also active income as well. So, here are two major strategies. If someone who is not working full-time, or you are married to someone who’s not working full-time, becoming a “real estate professional” is what allows you to then use rental losses against all types of income. … But, the reality is not everyone is fortunate enough to not be working full-time or married to someone who is a stay-at-home. And for people like that, typically what would make a lot of sense is the short-term rental tax loophole. Because if you invest in Airbnb’s and short-term rental properties, it is possible to use those tax losses against W2 income without having to quit your full-time job. … And that’s important for a lot of high-income professionals. You know, doctors, for example, not many of them want to quit being a doctor just to become a landlord, right? Let’s face it, they want to continue in their profession, but they also want to build wealth with real estate.”

The “1031 Exchange”:

“It’s basically a gift the IRS gave us many years ago, but it allows you to sell an existing property and buy replacement properties. In a typical world, you’re trading up to a better performing asset or a more valuable property, better cash flow, whatever it is, better appreciation. And you can do that without having to pay taxes on the gain on the sale of your existing property. So, you’ve got a property that’s gone up in value a lot. But it’s maybe run its course. It’s tapped out on the equity appreciation. And you can get a better performing asset elsewhere. Well, you can sell the old one, reinvest the money and not have to pay taxes right now, and just kind of kick that tax can down the road.”