Pod Insights BiggerPockets Real Estate Podcast How to (Legally) Reduce Taxes with Real Estate + Crucial New Trump Tax Plans About this episode The clock is ticking to tax day, and you could be stuck with a big tax bill. Thankfully, if you own real estate, reducing your taxes is easy. Don’t know which write-offs to take? We brought CPA and real estate investor Amanda Han on the show to break down the most crucial tax-saving tips for real estate investors. Plus, she sheds light on President Trump’s tax plan, how it could significantly benefit real estate investors, and what changes to watch for. If you’re not taking advantage of write-offs like depreciation or boosting your retirement with tax-deferred real estate investing, you could be missing out on tens of thousands, if not hundreds of thousands, in tax savings. Keep more money in your pocket come tax day by following Amanda’s tips (you don’t even need a CPA to take advantage of some of these!). Will Trump bring back the holy grail of tax deductions—100% bonus depreciation? Could he make “SALT” (state and local tax) deductions uncapped so you can lower your federal taxes even more? What about the other “tax-free” income source that could become a reality in President Trump’s second term? Amanda is sharing info on all of it so you can pay less taxes, keep more of your hard-earned money, and invest faster! In This Episode We Cover: The one massive real estate tax deduction that President Trump could bring back soon One real estate write-off every single investor should take advantage of NOW How to use your retirement accounts to buy real estate (and defer your taxes!) “SALT” deductions and how this could significantly reduce your federal income taxes Do you really need a CPA to take advantage of real estate tax deductions? And So Much More! Links from the Show Join BiggerPockets for FREE Let Us Know What You Thought of the Show! Ask Your Question on the BiggerPockets Forums BiggerPockets YouTube Invest in High-ROI Turnkey Rentals with Rent to Retirement or Txt REI to 33777 Sign Up for BiggerPockets Momentum 2025 to Supercharge Your Investing This Year Grab Amanda’s Books on Real Estate Tax Strategies Find Investor-friendly Tax and Financial Experts 4 Real Estate Tax Strategies That Can Protect You From Inflation Connect with Amanda Connect with Dave (00:00) Intro (02:27) Huge Tax Savings of Real Estate (08:05) DON’T Forget About This (13:08) Investing with Retirement Accounts (20:53) New Trump Tax Policies (26:22) “SALT” Tax Savings (31:37) Will Capital Gains Change? Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1076 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected] . Learn more about your ad choices. Visit megaphone.fm/adchoices
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:05 Dave Meyer? What's up everyone, it's Dave. We are of course past the new year, which we are just counting down the time to everyone's least favorite day of the year, April 15th. Because of course, paying taxes really sucks. But there is actually sort of a silver lining for real estate investors. Then tax season sort of makes me feel grateful to be a real estate investor, because owning real estate has a ton of tax advantages. Properties of course make you money, but they also help you keep more of your cash flow, and it can even offset gains from other investments or your ordinary income. It is a lot of paperwork, but let me tell you from some very expensive experience, that it is worth thinking about
0:46 Dave Meyer? and talking about this stuff, because you are almost certain to save more money if you just invest a little bit of time and money into optimizing your tax strategy. So today on the show, we're getting ready for tax season with our guest, Amanda Han. Amanda is a CPA, she's also a real estate investor herself, and she specializes in helping other investors reduce their tax burdens as much as possible. In today's episode, Amanda is going to talk us through the basics that every investor should know before filing their taxes, and she's even going to share a few more under the radar style tips that only pros really use. Then in the second half of the show, we're going to get into a question that's been on my mind, and from the questions I get, it's on a lot of other
1:29 Dave Meyer? people's minds right now. What does the new Trump administration mean for taxes going forward? Are we going to pay less? Are there going to be any changes to the many tax benefits we enjoy as real estate investors? Let's find out with Amanda Han. Amanda Han, welcome back to the BiggerPockets Podcast. Thanks for being here.
1:48 Speaker 01 Yes, I'm so excited to be here with you, Dave.
1:50 Dave Meyer? Well, you are a frequent guest and friend of the show, but for anyone who's new around here, could you just give a brief intro?
1:57 Speaker 01 Yes, my name is Amanda Han. What I tell people is I am a CPA by day and real estate investor by night. So like most of you guys, I invest in real estate, and my passion is really in helping real estate investors nationwide on how to use real estate to not just build wealth, but also save on taxes. So I'm so excited to be here because it's tax season, taxes are top of mind.
2:23 Dave Meyer? I'm glad you are excited about tax season.
2:26 Speaker 01 Somebody has to be.
2:27 Dave Meyer? So let's just start with what are like sort of the big picture things? If anyone is new to this and maybe not as familiar with some of the tax benefits for real estate, what are sort of like two or three things that you think real estate investors should be thinking about as we head into tax season?
2:42 Speaker 01 So I think as a real estate investor, especially for those of you who are new to real estate investing, it's important to understand that once you start investing in real estate, you're actually a business owner in the eyes of the IRS. So what that means is whenever you hear people talk about business deductions, the definition of business also includes real estate, whether it's rental properties, if you are doing your first bird property, or you're flipping real estate, wholesaling real estate, those are all businesses, which means if you're involved in those activities, we can start to write off our business expenses against that income, which is kind of different. You know, if you just have a W-2 job, maybe historically, we were very limited in terms of what we can write off.
3:25 Speaker 01 So it kind of opens up a whole new world about what we can deduct and how we can plan ahead now to make tax time a little bit more fun.
3:34 Dave Meyer? Good. I would love to make tax time a little bit more fun. And that totally makes sense. Yeah, like just as a business owner, you get to spend money on your business and a lot of that is tax deductible. But there are also additional things that are sort of unique to real estate beyond just being small business, right? Can you share with us some of the big buckets of tax laws that people should familiarize themselves with?
3:57 Speaker 01 Yeah, for sure. I mean, one of the, you know, the benefits of real estate investing is not only do we get to take business deductions, you know, business deduction are just like we spend money on maybe like a BiggerPockets membership. We buy a tax book to learn about real estate investing, or you know, memberships we pay, or just regular expenses. In addition to that, we also get to take what's called depreciation. And depreciation is basically a paper write-off. We call it a paper write-off because you're not actually losing money, but tax law allows you to write off the purchase price of your building over time. And so when you hear A lot of times when people talk about real estate tax benefits, real estate losses. I think for those people who are newer to real estate, they kind of get alarmed.
4:42 Speaker 01 Like, why am I losing money? Why do I have tax losses? So it's really important to understand that when we talk about tax benefits, we're not saying lose money on the investment. Right? In fact, hopefully, we're getting cash flow and appreciation and making a lot of money. But with tax planning, we're using things like write offs and depreciation specific to real estate to then create a loss that in turn helps us to save on taxes.
5:05 Dave Meyer? Can you tell us, just give us an example, like if you were making, say, five hundred dollars a month in cash flow, right? So you you profited about six thousand dollars in a year from a single rental property. How could depreciation help you shelter some of that from immediate tax?
5:23 Speaker 01 For sure. I mean, depreciation is just an additional expense that we can write off. So you obviously, if we're saying we're cash flowing five hundred dollars a month, that's after we've paid all of our operational expenses. But if you have a property, and let's say your depreciation is going to be five thousand dollars for the year. Well, instead of paying taxes on six thousand dollars worth of income, we get to write off that five thousand against it. So maybe our taxable rental income is only a thousand dollars. And so what we love about depreciation is that we get to take that tax write off regardless of what's actually happening to our properties or what's happening in the market. So we could have a property where it's actually appreciating in value.
6:06 Speaker 01 Well, it doesn't matter because for tax purposes, we still get to write it off because that's the tax law. And you also, I think too, when you hear people who say like, hey, I pay so much taxes on my income. Well, now as an investor, we get to make more income, like rental income, without paying a lot of taxes on it, right? And that's, that's all of our goals, right? Create more income without working harder, but also creating more income that I don't have to pay a huge amount of taxes on.
6:34 Dave Meyer? Yeah. And just for everyone to understand, like I, I work full time. I have, you know, I pay full, regular, ordinary income tax on my W two job here at BiggerPockets. I also get rental income and not just like in terms of long-term benefit, but the rental income is literally worth more to me because of depreciation, right? Because I can write off a lot of expenses that basically allow me to defer taxes on that current income, which means it's worth, depending on your tax bracket, like somewhere between 20 and 35% more, right? Because you're not paying tax on your rental income like you are on your W2. It's just one of the many benefits of real estate tax.
7:14 Speaker 01 For sure. And if you happen to live in a state that has high income tax rates, you know, I live in California, although I have fine nationwide, but I'm in California. And if you're a high-income earner in California, you're losing over 50% of income to taxes. And I love what you said, Dave. So it's like, hey, if I'm making $6,000 from my job and $6,000 from my rental income, well, guess what? On my rentals, I probably get to pocket the whole 6,000.
7:38 Dave Meyer? Yeah.
7:39 Speaker 01 Versus on my W2, I don't know, maybe I get to pocket 4,000, 3,000 of it after taxes. And that's why it's such a precious bucket of money.
7:48 Dave Meyer? Yeah, like in California, you would have to earn $9,000 in W2, basically, if you're a top earner, to get the same thing as $6,000 in rental income. So that's, that's just one of the great parts of depreciation. And as you said, it's sort of a misconception for some people. Are there other common myths or misconceptions you hear about real estate tax?
8:10 Speaker 01 What a lot of people don't know is that not only can rental losses offset taxes from rental income, but sometimes we can also use it to offset taxes from our W2 income as well, especially if you're someone who makes under $150,000. Like if your W2 total income is $100,000 and you own, you know, one or two rental properties, you can actually use up to $25,000 of your rental losses against your W2 income. And that's just the tax law that's for everybody who invests in real estate.
8:44 Dave Meyer? Is that true for married people too? 150 is the limit?
8:46 Speaker 01 Yes, unfortunately, it's a marriage penalty.
8:51 Speaker 01 Yeah. So normally, if you know, if you're, if you're Income. So yeah, again, if your income is under a hundred thousand or between one and one fifty, um, you can generally use up to twenty five thousand dollars of rental losses to offset that income. And it's really, really impactful for people in that income range group, right? Because if you think about it, if I can make a hundred thousand of W two income, you know, and not pay any income taxes and use all of that money to then reinvest in real estate and kind of rinse and repeat every year. Yeah, I can grow my wealth so much faster, right, than paying taxes on the whole thing. But yes, for those who are married or people whose income is over one fifty, uh, the laws are a little bit more complex in terms of who can use the losses against what type of income.
9:34 Dave Meyer? Are these types of advantages like depreciation and cost segregation studies? Are these things that people can do themselves? Or do you need a CPA or like a real estate specific CPA to be able to figure this out for your own filings?
9:51 Speaker 01 You know, I've seen both. Um, I think the answer to that question depends on the investor's knowledge when it comes to taxes. I would say that, you know, if you're pretty well versed in tax law, then yeah, it's okay, probably okay for you to do your own tax return. Um, especially if it's pretty simple. You don't have partners. It's maybe just you or you and a spouse owning a rental property. Um, it's not that difficult to do. Uh, but if you're trying to do accelerated depreciation, if you're taking advantage of some of the more complicated or advanced tax law, then oftentimes it makes sense to have a CPA or an enrolled agent, you know, a professional to help you do the tax filing. Because, you know, when we talk about real estate tax benefits,
10:34 Speaker 01 we're generally not talking about saving five hundred dollars or a thousand dollars in taxes, right? We're talking about, you know, five, ten, fifteen thousand or more in taxes. And because the tax savings are so significant, if you make a mistake and you're caught, the penalties and interest are also very significant. So, yeah, it's not that to say you can't do your own taxes. You certainly could if you're someone who's very knowledgeable. Uh, but if we're talking about larger numbers, typically recommend that you go to a professional.
11:03 Dave Meyer? That is a very modest answer, and I understand why you're you're not just telling people to go out and hire CPAs. You're being very kind and encouraging people. I'll just do it for you. Go hire CPA. Honestly, it's so much better. I have tried to do my taxes by myself, and it is humiliating how confusing I felt like it was. And paying for a CPA, not only just like peace of mind, has been so helpful, but as an investor, it helps you in year and it also just like helps you plan for the future in a way that I think is extremely valuable to your overall portfolio strategy.
11:39 Speaker 01 Filing tax return is kind of the necessary evil, where we have to report what we did or didn't do last year. But when you work with the CPA and you can focus on tax planning, like what should we do this coming year? To make sure I have the right portfolio, the right investment, save on taxes. That's really the key, right? That's the value your CPA brings to you.
11:59 Dave Meyer? Yes, totally on board. Definitely consider this very strongly, especially if you have more than one rental property. Amanda, we do have to take a quick break, but before we do, I wanted to ask you something as we're talking about taxes. You're joining BiggerPockets Momentum, right? You're coming to our new virtual summit?
12:17 Speaker 01 Yes, I am. I'm so excited. It's gonna be my first time.
12:20 Dave Meyer? Oh, great. What are you? I assume it's about taxes, but what are you? What are you going to be talking about?
12:25 Speaker 01 Oh, man, so fun. Lindy and I were just chit chatting yesterday. We have a lot of cool things planned. Because I know our audience will be made up of people that do different types of real estate. So we're going to be covering tax strategies, legal entity structuring strategies for long-term investors, midterm, short-term, flippers, and maybe also passive investors too. So really excited about that.
12:49 Dave Meyer? Awesome. Great. Well, if you want to check out Amanda's session at Momentum 2025, or any of the other great sessions or mastermind groups that you get with that, go to biggerpockets.com/2025 and grab your ticket. We'll be right back.
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16:41 Dave Meyer? Welcome back to the BiggerPockets Podcast. We are here with Amanda Han, real estate tax expert. So far, we've talked a little bit about sort of sort of basics of tax for those of us who are just getting started in real estate or are not super privy to all the tax benefits that real estate offers. I'd like to move on to talk just quickly about some of the more advanced strategies. Then I really want to ask you about some of the current events and things that might be happening with the new administration. But first, what is, you know, I don't know if you call them hacks or tricks or loopholes, but like, what are some of the more exciting or less known tax advantages to real estate that you recommend to your clients?
17:20 Speaker 01 You know, one of the lesser known things about tax and real estate is Just our ability to invest in real estate with our retirement money. You know, I think one of the the most common questions I get a lot from investors is, you know, I would love to buy more real estate. How do I get money to buy more real estate? Where do I get money to buy real estate? And of course, we always hear about, you know, creative financing, seller financing, you know, subject to all those, all those fun things. But, you know, why not start with what you already have, right? I think for most Americans, a lot of our wealth is actually tied up in retirement accounts. If you have a job in the past or you currently have a job, um, most people have a lot of money in their 401ks or in their IRAs or Roth IRAs.
18:04 Speaker 01 And so, um, we talk about, you know, planning ahead for our next deal, uh, trying to fund our next deal. That's a really great resource to start looking at. And who is it good for? Well, if you're someone that real estate is sort of your expertise or you have unique insight into real estate and you think that you can do better investing in real estate than the stock market, then why not take your retirement money out of the stocks, bonds and mutual funds and move it over to real estate assets? Now, I do want to clarify, I don't mean distributing or liquidating a retirement account for real estate because there are some pretty harsh taxes and penalties associated with it. The better or an alternative way to do it
18:48 Speaker 01 is to simply move it from one account into another type of retirement account, but still using a retirement account to invest in real estate. Normally, those are called self-directed accounts. So like if your money right now, if you have an IRA with, um, Wells Fargo, we're not liquidating it, we're just moving it from Wells Fargo to a self-directed custodian. And then from there, it invests in real estate to continue to grow tax-deferred or tax-free.
19:14 Dave Meyer? And can you explain a little bit how that works? Because, so basically, you've contributed money to an IRA or a 401k through your career. You have some, let's just call it a hundred thousand dollars, using your example, in Wells Fargo, who manages your retirement account. You move it over to a new self-directed custodian and what tax Advantage do you get?
19:35 Speaker 01 The concept of self-directed investing, really what we're saying is, you know, we have money in the stock market. And let's say it's growing at three percent, but I know if I move it over to real estate, I'm gonna do a BRRRR or just a regular long-term single-family rental, I can generate six percent return, then that is the benefit, right? Generating higher return with the money instead of stock market, I'm putting in real estate. When you do it correctly, uh, with, we do what's called a rollover, a direct rollover. So that money, let's say it's a hundred thousand dollars, let's say it's fifty thousand. That money from Wells Fargo never touches your hands. It goes directly from Wells Fargo to the self-directed custodian. When you move it that way, it's tax-free, penalty-free, because all I've done is change it to another account, right?
20:19 Speaker 01 And once the money is in that account, it goes out and buys real estate. Now, in the future, um, before you reach retirement age and start taking money out, in the next several years, rental income goes back to the retirement and the benefit of that is it continues to grow tax-deferred.
20:34 Dave Meyer? Oh.
20:35 Speaker 01 So you don't have to worry about paying taxes on it. Yeah, if you were to sell that property and you wanted to trade up into a duplex or multifamily, you also don't have to worry about ten thirty-one exchange or anything like that at all, because it's always inside the retirement account. So a lot of really great benefits associated.
20:51 Dave Meyer? Wait, I just want to understand one thing you said. So if you generate cash flow profit, it goes back into the 401K?
20:57 Speaker 01 Yes, yeah.
20:58 Dave Meyer? Oh, cool.
20:59 Speaker 01 If you want to continue to have it grow tax-deferred or tax-free, then it goes back into the 401K. You could say, well, I want to take some of that out personally, I want to use it for, you know, personal spending or whatnot. But just keep in mind, whatever portion or amount you take out of the retirement account, that is considered a distribution, so you may have to pay taxes or even penalties if you're not of retirement age yet. But the concept of it, you know, is, it's the same, right? Right now, your 401K is invested in stocks. And so when there's, there's stock sales and there's dividend, it goes back into the, the, that IRA or 401K. The same exact thing when it comes to real estate.
21:37 Dave Meyer? All right, and I'm sorry, I'm digging into this. I gotta be honest, I've like always known this is a good strategy and I've just been. Low on my priority list. I do like the idea of it. I just have two other quick questions. One is, do you have to move your whole account to a self-directed? Or can you sort of split it between two different custodians?
21:59 Speaker 01 Great question. So we can actually move any part of retirement account over as we wish. So if you, you know, just left an employer, there was $500,000 in your 401k. You can say, well, I only want to roll out 100,000 into the self-directed. The rest I want to keep in this account, or I want to roll it over to Wells Fargo or Vanguard and, you know, do all different types. So it's always up to you how much or how little you want to move over to a self-directed account. And again, if you do it a direct rollover, it's going to be tax-free and penalty-free.
22:32 Dave Meyer? Okay, last question, then we'll move on to what's going on with some of the policies Trump has proposed. How hard is it to do this? Is it a pain in the butt to like open a self-directed account?
22:43 Speaker 01 It's actually super simple. We refer to it as a three-step process. Open an account. So the first step, believe it or not, is you want to open the account. That means interviewing different self-directed custodians to see who you like. They all do the same thing, but of course, you know, bigger companies, smaller companies. So find the custodian that you like. Step one, right? Open the account with them. Step two, roll the money over. So let's say I opened mine with Udirect or Equity Trust. They're going to have paperwork for you where you can say, hey, currently my money is at Wells Fargo. Please go over and request that the money be transferred. So that's it. You don't even have to do anything. Just fill out the paperwork. They will request the transfers directly. Once the money is in the self-directed account, then step three, start shopping.
23:29 Speaker 01 Start shopping for real estate, notes, syndications, you know, basically all sorts of, you know, real estate or even non-real estate assets and, and you know, start building wealth.
23:39 Dave Meyer? Okay, I mean, it sounds like everything in my life with taxes where I build it up in my mind to be a huge pain in the butt. And it's like going to be so terrible. And then it's actually really not that hard.
23:50 Speaker 01 Yeah. And you know, I think, I think you're not alone, you know. People tend to think of tax in general or finance too even right as very complicated. But I think that if you have the right tax advisor or financial advisor or just real estate coach, that's where their job, right, is to help simplify it because you don't need to know all the rules about self-directed investing. You just need to know like, what are the things I need to do? Step one, step two, step three. And then I have an advisor or mentor I can count on that's like, hey, I'm thinking about doing this. Is that okay? It's going to be a problem and they can help you with all that.
24:26 Dave Meyer? All right. Well, thank you. This is super helpful. I do want to turn to sort of current events and what's changing because it does seem like there are some big policies that could be enacted in the coming year that could have a real big impact on all Americans, but specifically real estate investors. So President Trump, he's getting inaugurated. We're recording this on the 13th next week. And he's made a lot of comments about different types of tax policies and tax benefits that he's thinking about. We obviously don't know which ones are going to get enacted in what order and what degree. But like, are there any that you feel confident are going to be enacted right off the bat?
25:03 Speaker 01 Gosh, you know, I'm a very optimistic person, so I feel pretty confident that most of the things that he actually put in place many years ago will be extended, at least temporarily, or come back in some form or fashion. You know, for real estate investors in our community, of course, bonus depreciation is the one that's top of mind for everyone, right? We started out 100% bonus and now this year in 2025, we have 40% bonus. Currently it's scheduled to go to 20% next year and then zero thereafter. So the Trump administration has signaled pretty strongly that they want to bring back 100% bonus depreciation
25:49 Speaker 01 in some form or fashion. So, you know, we're really hopeful, keeping fingers crossed, right? That's a huge one for real estate investors, especially those who are able to use real estate to offset, you know, their business income or W2 income, qualified business. Income is another one. People don't talk about it as much. It's less sexy than a bonus depreciation. The qualified business income essentially allowed up to twenty percent of certain types of income to be tax free. So example might be if you made a hundred dollars of taxable rental income, you only pay taxes on eighty dollars of it. So twenty dollars of it was completely tax free. This is also something that is currently scheduled to sunset or expire.
26:31 Speaker 01 As of the end of next year, we're hopeful that this will also be reinstated too.
26:37 Dave Meyer? Okay, great. So just want to first clarify something. Back in twenty seventeen, Trump passed just a kind of sweeping tax reform act called the Tax Cuts and Jobs Act. That lowered corporate taxes, it lowered individual income taxes, and it adjusted a lot of the tax code. When that was enacted in twenty seventeen, I think it was it was set for eight years, basically, right? And so it was already set to expire in twenty twenty five, regardless of what happens. Trump has campaigned on at least extending them. So like taking what we have today and continuing that into the future. And you said your optimistic mandate, I think it's pretty likely with, you know, a Republican Congress and a Republican president
27:22 Dave Meyer? that that is going to get extended at the very least. He's also, though, said that he would consider expanding it. Could you tell us about some of the policies? I know we don't know if they're going to get enacted, but like, what are some of the policies that you think people should be keeping an eye on next year to see if they do or do not get enacted?
27:40 Speaker 01 Yeah, I mean, during the campaign, he talked a lot about exempting from taxes, tips, right? Overtime pay, social security. And it's funny because for a lot of our clients, they're like, well, that doesn't really apply to me. You know, if I I'm in real estate, I don't really earn any tips or overtime pays, maybe I don't care as much. But you can imagine how for businesses and you know, business could be like a property management business or Airbnb co-host, right? You start to play around with the concept of, well, what is the definition? Definition of overtime pay.
28:15 Dave Meyer? Yeah.
28:15 Speaker 01 What is the definition of tips? Is that I want to pay my employees or my cleaners? So that one, you know, those are new, right? Those, those expansions are kind of brand new concepts. That's not, we've not had in tax law before. So it'd be interesting to see which one of those passed. And if so, how they define and try to confine what the definitions of each of those are. It's like I said, you know, what is the definition of tips? Maybe, you know, Dave's getting paid tips from BiggerPockets instead of salary.
28:43 Dave Meyer? Yeah, I mean, I will take a hundred percent tip pay. Cause I will pay tax. I was actually listening to a podcast and economists talking about this. And they were saying, there's pros and cons to these types of things. But they were saying like, if you're someone who's frustrated by tip culture now, if this happens, like everyone's going to be asking for tips. You know, it's already gotten like pretty out of control. Um, and I actually saw this article over the weekend in the Wall Street Journal about how Americans are, there's like a backlash starting against tipping. But if this, uh, you know, if this policy comes in place, you know, that's econ 101. People follow financial incentives. They will find a way to get tipped rather than paid. So that could be a really interesting thing to keep an eye on.
29:28 Speaker 01 Maybe the next BiggerPockets book will be how to make a lot of tips from your next rental property. Tax free.
29:33 Dave Meyer? Yeah, exactly. Yeah, just leave a tip jar for your tenants out to tip you for anything you do. All right, Amanda, we have to take one more quick break. After that, I want to ask you about SALT taxes and how that could impact property values. But first a word from our sponsors.
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35:10 Dave Meyer? All right, we're back with tax expert Amanda Hahn talking about taxes for 2025. And one that I'm curious about is the so-called SALT tax. Stands for state and local tax. And Amanda, correct me if I'm wrong, but from what I understand, on your federal return, you can deduct a certain amount of tax that you pay to your state government and to your local government. But it's currently capped at $10,000. So if you paid 15,000 in California, you're probably paying more than $10,000 a year in local tax. And you can only deduct $10,000 from your federal return. So how might that change in the future?
35:49 Speaker 01 Trump has talked about increasing that from 10,000 to higher numbers. But he's also floated around the idea of getting rid of that cap altogether, which would mean that, you know, if you paid 15,000 in state income taxes, and let's say you paid another 15,000 in your primary home property tax, now you can write off the whole 30,000 rather than just the current 10,000 limitation. I think that would be very, very favorable and welcomed for all the folks who live in high taxing states, right?
36:27 Speaker 01 California, Hawaii, New York, because the SALT limitation has really reduced people's ability to save on taxes for, you know, the last couple of years. If you think about it, for someone who makes only W-2 income, let's say you don't have any rental real estate at all, you don't have a side business, just W-2 income, our ability to deduct taxes that we pay to the state was one of the few very impactful. Things that you could write off, right? And so, so once they limited to only $10,000, there was a huge uproar about that several years ago. I will say, though, that this $10,000 state property tax limitation is only at the individual level for our personal thing.
37:13 Speaker 01 So, personal state taxes we pay, and then the property tax on our primary home. That's what's being limited. For those of you investing in rental real estate, we always had the ability to deduct whatever the property taxes are for our rentals, so that was never limited.
37:28 Dave Meyer? Okay, that's good to know. But didn't SALT tax deductions used to be unlimited? And then this limit went in in 2017? So that maybe is something Trump is altering about his new tax policy?
37:40 Speaker 01 Yeah, like we're just going back to whatever, you know, the old law was that we used to be able to take advantage of. And the other thing I was gonna say too is, you know, I know Republicans now like a sort of control, you know, Congress too. But my expectation is a lot of these tax changes that they were to come into effect will probably still be what we call temporary changes. So kind of like the Tax Cuts and Jobs Act. It wasn't like indefinitely we get 100% bonus depreciation. It was only for a certain amount of time, it kind of dwindled down. So we do expect that to kind of be with these next rounds of changes that'll still be temporary in nature. Because there's a lot more they have to come to an agreement on in order for any of these to be permanent changes. Which, you know, what does that mean for investors?
38:24 Speaker 01 It just means that we just have to kind of stay on top of the news and the law and be able to take advantage of whatever the new breaks are while they still exist.
38:34 Dave Meyer? Totally agree, staying on top of it. Just wanted to say one more thing about SALT. Because I'm curious about how that might impact property values in places where this has been a significant issue, like New York or New Jersey, you said California. Because I would imagine this has impacted affordability for people. And that always impacts spending, GDP, you know, housing prices. And so if this does get, you know, the limit either gets eliminated or increased, like do you see some, some tailwinds? Or home prices in those areas, something I'll definitely be keeping an eye out on.
39:07 Speaker 01 Yeah, I think so. I mean, not to say tax is the main reason people decide where to live, but it is one of the things top of mind, right? When we think about where we want to live. And so in the past couple of years, you have places like, you know, California, New York, where taxes are high and, you know, ever rising. And not only that, but we limit your ability to deduct what you paid, right? That's like kind of more incentive for people to move out. Um, and so with the removal of that, maybe hopefully we'll see a little bit of a reverse migration trend. But of course, you know, there's a lot of different factors that come into play. But I do see just kind of in general, like policy impacting decisions.
39:48 Speaker 01 And for me as a, a real estate CPA, I for sure see that, you know, back in, a couple of years ago, when we had a hundred percent bonus depreciation, our clients were very, very aggressive about what they bought and all the acquisitions and stuff. And as you can see, when the, the tax benefits of investing in real estate dwindled down, you know, harder to get into real estate with interest rates and, you know, markets tightening, then you see, you see like fewer deals being made. So it's interesting. I mean, I guess that's the intention, right, of tax law and monetary policies. It's to try to incentivize or disincentivize certain actions. But it's just interesting to kind of see that in real life.
40:25 Dave Meyer? Last question for you here is about capital gains and capital gains rates. If you're unfamiliar, capital gains is basically the tax that you pay on the sale of assets, right? Rather than your ordinary income. And so if you own stock for a year and then you sell it, you pay capital gains tax, which I think is between 15 and 20%. And for many Americans, that's lower than your ordinary income. But I feel like politically, people are always talking about the rate of capital gains. Should it go up? Should it go down? Do you think there's any chance that it changes in coming years?
40:56 Speaker 01 Well, I mean, if I had to guess, I feel like under Trump's administration, it'll probably remain the same or go down. Um, I don't expect capital gains tax rates to go any higher. But yes, you're right. I mean, generally the tax strategy is if you have an asset, whether it's stocks or real estate. If you hold on to it for longer than three hundred and sixty five days, we get the long term capital gains rate and that's what we call the preferred rate. Because it's generally lower than your other, you know, like your W two job or a business that you have. Right. So typically the, we call it the lower long term capital gains tax rate. Um, you know, it's interesting is uh every time there's an election, there's always talks about ten thirty one exchange. Is that going away? Is that being limited, being phased out, whatever it is?
41:41 Speaker 01 Surprisingly, we didn't hear a lot about that in the election that just happened. So, you know, I think for real estate investors, the reality is practically speaking, capital gains tax rates are not as important, or I guess are not as top of mind as ten thirty one exchanges are. Because if we have ten thirty one exchange like we do now, and assuming it's not going to change, we always have the opportunity to delay our taxes, right? And so if we can, you know, sell a property, reinvest in another one without paying any taxes, my capital gains then then is zero because I'm not paying any taxes on it. I think we were concerned when people were talking about getting rid of ten thirty one exchange and increasing the capital gains rate.
42:22 Speaker 01 That's kind of like two double whammies, but for now I feel like, you know, we'll probably continue to have both of these benefits.
42:29 Dave Meyer? All right, great. Well, thank you, Amanda, so much for sharing your knowledge with us and your predictions about the the tax code, which is always hard to understand. But hopefully we can have you back because as with all economic policy, tax law, the devil's in the details, right? Like, we know some sort of like broad ideas about what might happen and what President Trump intends to do. But what investors specifically should be thinking about and doing is really going to depend on the language that actually gets passed into law. So as soon as that happens, assuming it does happen, we'd love to have you back.
43:02 Speaker 01 Yeah, I would love to. And I also think too, you know, tax law changes all the time. What I think a lot of people don't know is um we change our tax planning not just from law change, but also from tax court case changes. You know, as we all know, there are a lot of uh IRS got a lot more money um for audit services, right? Where they're auditing a lot of taxpayers. And what happens is from those court cases, the decisions of those court cases often impact how we do certain things. And so as an investor, you just, you know, you or you have an advisor that you can lean on to stay on top of those things so that you kind of have taxes on the back of your mind when you're making business decisions about what should I buy, where should I buy, when should I buy?
43:46 Speaker 01 Tax law change simply just means a change in strategy. And so, you know, being proactive really will go a long way to helping you to protect against any negative changes and helps you to take advantage of any positive changes.
44:01 Dave Meyer? All right. Well, great. Thank you so much, Amanda. We really appreciate it. If you want to learn more from Amanda, her two books for BiggerPockets are amazing. And as we talked about, you can see her at BiggerPockets Momentum 2025. You can get tickets to that at biggerpockets.com/summit2025. Thanks again, Amanda, and thank you all so much for listening. We'll see you next time for the BiggerPockets podcast.
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