How Real Estate Investors Legally Pay Less Tax

Real Estate Tax Planning for Investors

Real estate tax planning can play a major role in helping investors maximize the financial benefits of property ownership. In this episode of Lifetime Cash Flow Through Real Estate Investing, Jason Malabute explains how real estate investors can use strategies such as cost segregation, bonus depreciation, 1031 exchanges, and proactive tax planning to potentially reduce their tax burden. As a CPA and MBA who focuses his accounting practice almost exclusively on real estate investors, Malabute brings both accounting expertise and personal investing experience to the conversation.

Malabute’s path into real estate began after working in accounting, bookkeeping, and tax planning and seeing firsthand how rental property could generate cash flow outside of a traditional job. He began investing in single-family properties in Indianapolis and eventually built a team around his investments. In 2020, he left his job to pursue real estate investing full time and moved into multifamily syndication, underwriting roughly 100 deals before becoming a general partner in two deals totaling 342 units.

Why Real Estate Tax Planning Matters

One of the key lessons from the discussion is that successful real estate investing involves more than finding properties and generating rental income. Malabute explains that many successful investors have either an active business or a high-paying job that helps fund their real estate investments. His experience led him to recognize the demand for a CPA who understands the specific tax considerations faced by real estate investors, prompting him to start his own accounting firm in 2024.

For investors, proactive planning can help determine how tax strategies fit into an overall investment plan rather than waiting until tax season to discover potential opportunities. The conversation covers several strategies investors should understand, including:

• Cost segregation to accelerate depreciation on qualifying components of a property
• Bonus depreciation to potentially accelerate deductions
• 1031 tax-deferred exchanges when transitioning from one investment property to another
• Tax planning around passive real estate investments and syndications

Malabute explains that traditional depreciation generally spreads the deduction over long periods, while cost segregation can identify components of a property with shorter useful lives. The discussion also explains how bonus depreciation can allow qualifying property to be depreciated more rapidly, potentially creating a significant paper loss.

Bonus Depreciation and Cost Segregation

Cost segregation and bonus depreciation are two important concepts discussed throughout the interview. Malabute describes depreciation as a deduction that accounts for the useful life of property, with different categories receiving different depreciation periods. Cost segregation can accelerate depreciation by separating qualifying components into shorter-lived categories, while bonus depreciation can further accelerate eligible deductions.

The episode also explores how these strategies can become particularly relevant for investors with higher incomes. Malabute discusses situations involving real estate professionals and short-term rentals where, depending on the investor’s circumstances and applicable tax rules, losses may receive different treatment than they would under ordinary passive investment rules. These strategies require careful planning and proper qualification, making knowledgeable tax guidance especially important for investors considering them.

1031 Exchanges and Tax-Deferred Investing

Another major real estate tax planning strategy discussed is the 1031 exchange. The conversation explains how investors may defer taxes by selling an investment property and reinvesting the proceeds into a qualifying replacement property within the required timelines. Rather than simply viewing a property sale as an exit, investors can incorporate tax considerations into the decision about what they acquire next.

The discussion also connects tax planning with the BRRRR strategy. Refinancing after improving a property generally is not treated as a taxable sale, allowing investors to potentially access capital while continuing to hold the asset. Understanding the tax consequences before executing an investment strategy can therefore be an important part of evaluating how efficiently capital can be deployed.

Tax Planning for Real Estate Syndication Investors

Real estate syndication investors face additional considerations because limited partners generally receive passive investment treatment. Malabute discusses how timing can become an important planning tool for investors who have gains from one investment and losses from another. For example, a new investment that generates a significant paper loss may potentially be used to offset gains from a previous investment, depending on the investor’s specific tax circumstances and applicable rules.

The conversation also highlights why investors should understand the difference between depreciation, gains, and debt forgiveness when a property experiences financial trouble. The tax consequences can vary depending on the circumstances, including whether an investor signed on the underlying debt. This is particularly relevant in challenging market conditions, when distressed properties and troubled investments can create unexpected tax issues alongside the financial consequences.

About Jason Malabute

Jason Malabute is a CPA and MBA with experience in accounting, bookkeeping, tax planning, and real estate investing. He began investing in single-family real estate before transitioning into multifamily syndication and becoming a general partner in 342 units. In 2024, he launched an accounting firm focused on real estate investors, with approximately 99% of his clients coming from the real estate investment space.

Malabute continues to maintain real estate investments while concentrating much of his attention on helping investors navigate their accounting and tax planning needs. His perspective combines practical investing experience with his professional background as a CPA, making his insights particularly relevant for investors looking to understand how tax strategy fits into their broader real estate investment approach.

If you want to hear the full conversation and detailed insights, watch the podcast video or read the complete transcript below.

Frequently Asked Questions About Real Estate Tax Planning

What Is Real Estate Tax Planning?

Real estate tax planning is the process of strategically managing the tax implications of real estate investments. It can include strategies such as cost segregation, bonus depreciation, 1031 exchanges, and planning around passive real estate investments to potentially reduce or defer taxes.

Why Is Real Estate Tax Planning Important for Real Estate Investors?

Real estate tax planning can help investors understand how tax strategies fit into their overall investment plans. Proactive planning may help investors identify potential deductions, defer taxes, and make more informed decisions about acquisitions, sales, refinancing, and other investment activities.

What Is Cost Segregation in Real Estate Tax Planning?

Cost segregation is a tax strategy that identifies qualifying components of a property that can be depreciated over shorter periods than the property’s standard depreciation schedule. This can allow investors to accelerate depreciation deductions and potentially create larger tax deductions earlier in the investment.

How Does Bonus Depreciation Work With Real Estate Investments?

Bonus depreciation can allow eligible property to be depreciated more quickly instead of spreading the deduction over its full useful life. When combined with strategies such as cost segregation, it may create a significant paper loss that can provide tax benefits when the investor meets the applicable requirements.

What Is a 1031 Exchange in Real Estate Tax Planning?

A 1031 exchange is a tax-deferred strategy that allows an investor to sell an investment property and reinvest the proceeds into a qualifying replacement property while potentially deferring the tax that would otherwise result from the sale. Specific timing and transaction requirements must be followed.

Can Real Estate Tax Planning Help High Income Earners?

Yes, real estate tax planning can be particularly relevant for high income earners who invest in real estate. Depending on their circumstances and applicable tax rules, strategies involving depreciation, cost segregation, bonus depreciation, and qualifying rental activities may provide opportunities to reduce or defer taxable income.

How Does Real Estate Tax Planning Apply to Real Estate Syndications?

Real estate tax planning can help syndication investors understand how passive investment rules, depreciation, gains, and losses may affect their individual tax situations. Timing investments and understanding how paper losses interact with gains can be important considerations for limited partners.

Should Real Estate Investors Work With a CPA Who Specializes in Real Estate?

Working with a CPA who understands real estate can help investors identify and plan for tax considerations specific to property ownership and investing. Jason Malabute’s practice focuses primarily on real estate investors and combines accounting expertise with his own experience as a real estate investor.

00:00:37:27 – 00:01:02:01
Rod Khleif
Welcome to another edition of Lifetime Cash Flow through Real Estate investing. I’m Rod Cleef, and I’m thrilled you’re here. And I know you’re going to enjoy today’s interview. A wonderful guy named Jason Malibu and I met Jason at a it was a conference in Charlotte that was put on by Dan Hanford. Right. Fine. Oh, no, no, no, it was passive investing calm.

00:01:02:05 – 00:01:22:13
Rod Khleif
I’ve got him confused. Yeah. Passive investing and and we met there and and then now he’s here on the show which is fantastic. Now we’ll tell you Jason has cerebral palsy. So you know you have to have a little bit of patience with the communication. But he’s a wonderful guy and he’s done a lot. He’s a CPA an MBA.

00:01:22:17 – 00:01:33:05
Rod Khleif
He’s he’s been a general partner in 342 units. He’s done single family burr strategy, you name it. And and it’s just a super nice guy. Welcome to the show, brother.

00:01:33:09 – 00:01:35:17
Jason Malabute
Thank you for having me here. Right.

00:01:35:19 – 00:01:50:47
Rod Khleif
Of course, of course. So why don’t you talk a little bit about your background? Because, you know, it’s so impressive that you haven’t had, you know, your situation slow you down at all. You’re out there killing it. So talk, talk. Give us a little where you came from. Your Filipino. Yes. Okay.

00:01:50:49 – 00:02:38:35
Jason Malabute
Okay. My my parent, I never been, but I’m. I’m a born raising a lot of Angeles, California. Okay, to make the long story short, right? I’m growing up, my dream was to become a professional basketball player, and I see that did not turn out. I wanted it to be so. So, like, I remember going up, my dad, who used to tell me, son, you need to be a business owner one day because we could face the facts.

00:02:38:39 – 00:03:09:03
Jason Malabute
You have a disability. You have to body. You like to do nice things, you do have nice things. And. And it’s going to be harder for you to go and land a high paying job compared to your peers. So. So, I always had it in the back of my mind, rod. And I remember when I was going to college.

00:03:09:07 – 00:03:46:31
Jason Malabute
I had to reality that I was not going to be the first professional basketball player with with a disability. So, so I had no idea what I was going to take in college. And then my mom was like, you know what you should do? Accounting. So that one day when you have your own business, you can, you can, you can, you can manage your money.

00:03:46:31 – 00:03:50:39
Rod Khleif
And you can understand what you’re doing. You know, you can understand the financial side of it.

00:03:50:43 – 00:04:18:01
Jason Malabute
And then, you know, at the time I was like, hey, 18 year old kid. And I said, well, I have no idea what accounting is, but why not? You know, like, I have no idea. So so fast forward, I graduated college, I’m in the night, got my MBA and then.

00:04:18:05 – 00:04:20:07
Rod Khleif
I’m in accounting. Yes, okay.

00:04:20:19 – 00:05:00:43
Jason Malabute
Accounting. And I must have applied for every single accounting. Dubbing that’s and and and nobody would nobody would hire me. And then and finally I got a small accounting firm hiding in, in, in Culver City. And then I, when I learned how to tax it, accounting, bookkeeping, tax planning. And then one day I was doing with my client accident, who happened to be a rusty investor.

00:05:00:46 – 00:05:02:17
Jason Malabute
Right.

00:05:02:21 – 00:05:04:33
Rod Khleif
And a light bulb went off. Yeah, I.

00:05:04:33 – 00:05:17:07
Jason Malabute
Was I was a this guy is cash flow. It doesn’t matter if he goes to work or not. He had to go. And do I do for five every morning.

00:05:17:09 – 00:05:18:15
Rod Khleif
Oh good God.

00:05:18:19 – 00:05:38:37
Jason Malabute
Yeah. And and I was like, wow. Okay. Rusty is where it seems very, very interesting to me. I was like, okay, but but then how do you invest in real estate? So I started doing some research and that’s how I discovered Biggerpockets.

00:05:38:39 – 00:05:57:09
Rod Khleif
Okay. So that’s why you brought up Brandon before we started recording? Yeah, yeah. Poor guy. He’s he’s under the fire, but everybody is going through what he’s going through right now. There’s so many deals in trouble. I’ve got deals in trouble. People that I know that have jets, as I just mentioned, Dan, for example, they’ve got deals in trouble.

00:05:57:09 – 00:06:19:07
Rod Khleif
And, you know, I mean hundreds of millions of dollars. But but you know, I keep talking shouting this from the rooftops. With crisis comes opportunity. And there is an incredible opportunity right now I there’s a ton of property that is going up for auction being sold at less than, definitely less than the debt that was on it. Sometimes, very often less than it cost to build it.

00:06:19:07 – 00:06:28:41
Rod Khleif
And so, you know, if there was ever a time to get excited about this business, that’s right. Now, you know, not to get caught up in the pain, get caught up in the opportunity, right? Yeah.

00:06:28:47 – 00:06:35:33
Jason Malabute
Yeah, yeah. And then that’s how I got into single family.

00:06:35:35 – 00:06:38:11
Rod Khleif
And you were doing this in California. Single families?

00:06:38:13 – 00:06:50:35
Jason Malabute
No. So. So I still remember when I first got into it. Everybody was saying, don’t invest in California. Don’t invest in Los Angeles.

00:06:50:37 – 00:06:52:09
Rod Khleif
Myself included.

00:06:52:13 – 00:07:00:37
Jason Malabute
Very friendly. Then that’s how I started investing. Indianapolis, Indiana.

00:07:00:47 – 00:07:03:23
Rod Khleif
Great great. LA market Indies a great market.

00:07:03:31 – 00:07:21:31
Jason Malabute
Indianapolis, Indiana. I would invest in there for a couple of years. I built up for you. I built a team. Other. Wow. I’m in. In 2020, I wanted to become a full time real estate investor.

00:07:21:31 – 00:07:25:31
Rod Khleif
So you were still doing the CPA work or the or the counting work? Okay. Yeah.

00:07:25:35 – 00:07:40:39
Jason Malabute
So. So, so in 2020. You know, I, I said, you know, I, I’m going to read the next Donald Trump and, and then.

00:07:40:43 – 00:07:45:47
Rod Khleif
Don’t say that in California, by the way. Just.

00:07:46:01 – 00:07:57:13
Jason Malabute
That is why I quit my job back in 2020. Good for you became multifamily full time syndication investor.

00:07:57:15 – 00:07:59:45
Rod Khleif
So those 2020 you started syndicating. Wow. Okay.

00:07:59:47 – 00:08:16:45
Jason Malabute
Yeah. But with that said, the rod, it took me about three years to go in and find my first syndication deal. I might have underwrote it at least 100 deal to revive him over to do.

00:08:16:47 – 00:08:18:05
Rod Khleif
I believe it.

00:08:18:09 – 00:08:24:23
Jason Malabute
And then I finally became your partner on to yours. And then.

00:08:24:27 – 00:08:26:43
Rod Khleif
Where were these two deals? You were general partnering.

00:08:26:45 – 00:08:28:25
Jason Malabute
It’s not.

00:08:28:29 – 00:08:48:49
Rod Khleif
In Atlanta. Okay? I had some bad experiences. Atlanta. I don’t know if you have, but, God, just let me digress for a second. So, you know, I, I had an expert that ran a bunch of properties into the ground, and there were a couple of properties that I had done with other partners, and they asked me to step in and asset manage them.

00:08:48:49 – 00:09:03:33
Rod Khleif
And the day I was there, there was a shootout and somebody got killed and one of them. And then I went to the other one. There was a guy walking around with a gun sticking out of his waist, holding a walking a dog, and I said, are you going to kill the dog? He said, no, somebody got killed here a few months ago, and somebody got shot in the leg last week.

00:09:03:33 – 00:09:10:17
Rod Khleif
And this is two properties in Atlanta, so hopefully you haven’t had stuff like that in yours.

00:09:10:21 – 00:09:13:39
Jason Malabute
I can’t say that I have it, rod.

00:09:13:41 – 00:09:14:45
Rod Khleif
Okay, okay.

00:09:14:47 – 00:09:23:43
Jason Malabute
I can’t say I have it, you know, because we were, we were investing in. I’m sorry.

00:09:23:47 – 00:09:26:39
Rod Khleif
Oh, you had C-Class assets in Atlanta. Oh, God.

00:09:26:42 – 00:09:27:32
Jason Malabute
Last vintage.

00:09:27:33 – 00:09:34:25
Rod Khleif
And then they stopped the eviction process, too. Were you were you in that area where they you couldn’t evict people? God.

00:09:34:29 – 00:09:42:18
Jason Malabute
I remember doing it, and it was brought up for about six months. Yeah, I said that.

00:09:42:25 – 00:09:56:15
Rod Khleif
Yeah, you had to pay your mortgage, but you couldn’t evict people that weren’t paying. It was terrible. And then they’d talk to each other and say, yeah, they can’t do it us right now. So, you know, it got worse just based on the inner complex communications. Right.

00:09:56:21 – 00:10:07:25
Jason Malabute
And then what I learned from that is it’s a real estate. It’s a great.

00:10:07:29 – 00:10:08:33
Jason Malabute
Great investment.

00:10:08:45 – 00:10:09:09
Rod Khleif
Of course.

00:10:09:09 – 00:11:05:21
Jason Malabute
It is. But but but what I realized is that, most successful investors, that if you if it’s great, if if it’s Trump. Right. Or the guy down the street, they all have either a active business or they have a high income dub, which they use to feed their real estate investment. And, and that’s when the light bulb went to my head, because I realized I’m being real estate for so long is that there’s so much demand for a real estate specific CPA.

00:11:05:25 – 00:11:14:25
Jason Malabute
So. So that’s when I started my own accounting firm I see in 2024, and we haven’t looked back since then.

00:11:14:27 – 00:11:34:41
Rod Khleif
So that’s, that’s that’s your your main business. And I was a CPA firm. And you help real estate investors. Got it okay. Well let’s let’s pivot into some of the strategies that you help real estate investors with. I mean this come up on the show before but it’s good to talk about this stuff. So you help with cost segregation I take it.

00:11:34:42 – 00:11:45:33
Rod Khleif
Yes okay. You know bonus depreciation 1031 tax deferred exchanges. Talk about do you do anything planning wise. Talk about what you do planning wise.

00:11:45:35 – 00:11:46:39
Jason Malabute
All the time.

00:11:46:43 – 00:11:47:09
Rod Khleif
Really?

00:11:47:11 – 00:12:04:41
Jason Malabute
Okay. Especially since last year we had big tax bill changes because of the One Review Act. We had a we had a 100% bonus depreciation.

00:12:05:01 – 00:12:06:47
Rod Khleif
Come back reinstated.

00:12:06:49 – 00:12:11:41
Jason Malabute
Right. So that’s been a big help to our clients.

00:12:11:43 – 00:12:14:07
Rod Khleif
Sure. Huge. Sure.

00:12:14:11 – 00:12:20:03
Jason Malabute
It’s who are who are investing in children rentals.

00:12:20:07 – 00:12:25:09
Rod Khleif
Short term. Yeah. Yeah. Some big benefits there. Yeah.

00:12:25:13 – 00:12:48:03
Jason Malabute
I tell my client I didn’t know and like he is a high income earner. And then then, they bought a certain rental last year. And then we did a tax plan for them, to go and determine, first of all.

00:12:48:11 – 00:13:01:07
Rod Khleif
Talk about the because I know there’s some special, some special tax accommodations for short term rentals, and I don’t know that much about that. And it’s not come up on the show. Can you can you talk about that a little bit?

00:13:01:11 – 00:13:12:41
Jason Malabute
Sure, sure. So normally you can I’ve said your active income or it was without.

00:13:12:45 – 00:13:16:31
Rod Khleif
Loss of losses. Right, right. Unless you’re a real estate professional.

00:13:16:33 – 00:13:22:09
Jason Malabute
Real right. Or you have a rental.

00:13:22:11 – 00:13:24:03
Rod Khleif
No kidding.

00:13:24:07 – 00:13:41:31
Jason Malabute
And then you can qualify for your short term rental loophole. Wow. And I tell my client is that when you consider to being a professional, there’s a higher requirement for that, right?

00:13:41:33 – 00:13:45:37
Rod Khleif
Right. Oh, yeah. You better 700 hours or something, right?

00:13:45:39 – 00:13:47:15
Jason Malabute
750 hours?

00:13:47:17 – 00:13:48:35
Rod Khleif
750.

00:13:48:39 – 00:13:51:43
Jason Malabute
And then spend 51% of your time.

00:13:51:43 – 00:13:56:37
Rod Khleif
51% of your time in real estate, or spend 750 hours in real estate. Right.

00:13:56:41 – 00:14:05:19
Jason Malabute
And then also, you need to spend 500 hours a night on personal.

00:14:05:23 – 00:14:15:31
Jason Malabute
Since versus, If you have a short term rental, it’s only 100 hours.

00:14:15:33 – 00:14:16:07
Rod Khleif
Wow.

00:14:16:09 – 00:14:20:27
Jason Malabute
So it’s a much lower earth. Much.

00:14:20:31 – 00:14:44:01
Rod Khleif
And are you able to depreciate and all that and costs and everything, just like you would another property. And it can go against active income? Yes. Holy crap. That’s exciting brother. Yeah, that is freaking exciting. And and I mean, I suppose you have to. Wow. You got me thinking right now, actually, because, you know. And I’ll tell you, I don’t know if you’re dealing with this now, but you’re going to.

00:14:44:03 – 00:14:55:11
Rod Khleif
I think we’re going to see a lot of recapture with properties going down the tubes, and you’re going to see people that are involved in these things that took write offs have issues as well. Will that flow down to the LPs to.

00:14:55:15 – 00:15:06:27
Jason Malabute
So so so so that’s the thing is, is if you are a limited partner, most likely you’re not going to qualify as a.

00:15:06:31 – 00:15:36:45
Rod Khleif
No, no no I’m sorry, I’m sorry I shifted completely. Okay. I cut you off guard. So what I was saying is there are a lot of properties. We were talking about it beforehand. Like Brandon’s got some problems. So I know operators that have problems. There’s, you know, there’s a big operator that just lost $400 million. Steven. Something in Texas, those LPs, if if they did cause segregation and took bonus depreciation and those properties go south and go back to the bank, there’s going to be recapture.

00:15:36:47 – 00:15:38:01
Rod Khleif
Right.

00:15:38:05 – 00:15:41:33
Jason Malabute
So to it depends.

00:15:41:35 – 00:15:42:37
Rod Khleif
It depends.

00:15:42:41 – 00:15:53:11
Jason Malabute
So so, you only have depreciation. You can’t if you have a gain an apology.

00:15:53:15 – 00:16:15:30
Rod Khleif
So you have a gain. So if it sells for the debt there’s no gain. There’s no tax. No I thought I thought if you took the loss. Interesting. I thought if you took the loss previously, you would get dinged for the, the. Not not just just just the debt being wiped out.

00:16:15:34 – 00:16:21:17
Jason Malabute
That’s that’s different. Oh, that is called for.

00:16:21:21 – 00:16:27:21
Rod Khleif
Debt forgiveness. Right. Can that flow down to LPs or just to general partners?

00:16:27:25 – 00:16:31:37
Jason Malabute
Only for people who.

00:16:31:41 – 00:16:33:21
Jason Malabute
Signed off on the loan?

00:16:33:23 – 00:16:55:21
Rod Khleif
On the debt. Okay. Got it, got it. So people that signed on the loan got it. Well. Well, I mean, these are tough times for a lot of operators. That’s why I brought this up because I’m seeing a lot of it. And, you know, luckily I’ve only lost one deal in my warrior program. And I don’t know if you knew this, but my students now, we know, own 305,000 units under me.

00:16:55:23 – 00:17:14:05
Rod Khleif
More than that, that’s how I need to count is. So we know it’s a lot more than that. But the people that have responded, we’re at 305,000, which is more than everybody else that does this combined, including the grants of the world. But but so, so so you focus on real estate investors for your CPA practice, for the most part.

00:17:14:09 – 00:17:18:43
Jason Malabute
99% of our clients. So that.

00:17:18:47 – 00:17:21:03
Rod Khleif
Nice, nice. And where are you based now?

00:17:21:07 – 00:17:26:27
Jason Malabute
We’re in a lot of interest in Los Angeles okay. But we have clients.

00:17:26:31 – 00:17:36:29
Rod Khleif
Sure sure sure. IRS is nationwide. Yeah. So okay. And are you still investing or are you just totally focused on the CPA practice.

00:17:36:33 – 00:17:57:43
Jason Malabute
Right now? Right now most of my focus is in the CPA business. But but at the same time, I still have my investment. And also I definitely want to get back into investing also.

00:17:57:47 – 00:18:17:35
Rod Khleif
Yeah, I, I’m getting into senior housing as well, not just multifamily. It’s very exciting. So we’ve got we’ve got six assisted living facilities. We’re buying in Texas. Wow. We’re paying 40,000 a unit okay. You can’t build them for less than 250 to 350,000 units. And they’re nice buildings. It’s the best deal I’ve ever seen. Honestly, very, very exciting.

00:18:17:35 – 00:18:39:39
Rod Khleif
But but yeah, you know, I mean, I’m still really bullish on multifamily. Obviously there’s such incredible opportunity right now. But and I think it’s going to be here for a while too. They don’t talk. They’re not talking about lowering their rates at all. So you know I think they’re trying to meet that 2% inflation number, which they’re saying is not going to even happen possibly until 2028.

00:18:39:39 – 00:18:46:19
Rod Khleif
So I think there’s going to be a lot more carnage. But again with crisis comes opportunity, right? So yeah.

00:18:46:27 – 00:19:13:03
Jason Malabute
And and even if you don’t, you don’t find opportunity directly to, to, to acquisitions. It’s also opportunities to go to going users losses as, as testing. So.

00:19:13:05 – 00:19:31:03
Rod Khleif
Sure. For sure for sure. So you know, one of the big benefits, as we all know with a lot of tax benefits, there’s a reason 90% of the world’s millionaires either made it in real estate or invest in real estate. And the big reason is taxes. Okay, so I Trump didn’t want to show his tax returns, right? Because he doesn’t pay any taxes.

00:19:31:05 – 00:19:52:31
Rod Khleif
I haven’t paid taxes. I mean, that’s the beautiful thing about real estate. They set up the IRS laws to to promote property ownership and stimulate the economy with property ownership. So some of the strategies we just discussed was the 1031 tax deferred exchange, where you have to if you sell your property, you have to identify a replacement property with a certain amount of time.

00:19:52:31 – 00:20:13:17
Rod Khleif
And then you use a use a mediator or mediation word intermediary to hold the money. And and you’re able to, you know, push the tax on to the next property. And if you never sell that, you know, and, and take the gains, you’ll never pay the tax on it. It’s just like the Burr strategy. If you do the Burr strategy you don’t pay tax on the properties.

00:20:13:19 – 00:20:28:29
Rod Khleif
You know, it’s a beautiful thing. You buy renovate, refinance refinances aren’t a taxable event. And then and then, you know, if you’re not familiar with cost segregation, cost segregation. And what’s the typical straight line depreciation? How many years is that?

00:20:28:33 – 00:20:35:29
Jason Malabute
Full residential. It’s 27. That. And for commercial its 39 okay.

00:20:35:31 – 00:21:01:21
Rod Khleif
So 27.5 years for residential 39 for commercial. Well with cost segregation you’re able to accelerate that depreciation because they look at every single piece of a building the floors, the walls, the windows, the doors, the roofs, even the concrete. And they give it a remaining life and they accelerate the depreciation. Because depreciation is the is all about the wearing out of your property.

00:21:01:23 – 00:21:15:29
Rod Khleif
And so you’re accelerating it. And an engineer comes in and gives, you know, remaining life on these things. And then you’re able to massively accelerate the depreciation. And and could you explain bonus depreciation.

00:21:15:31 – 00:22:09:31
Jason Malabute
Yeah. So I think that you’ve hit the nail on the head right. No no money like the division is. It’s really over time whether it’s five, seven, 15, 27.5, 39. So so what I allows you to do is I’m anything that that’s in 20 years, I’m a useful life. Right? You’re able to accelerate that and able to go and and take that full depreciation 100% in year one, which would, which would give you a big paper loss right on an index.

00:22:09:35 – 00:22:31:15
Jason Malabute
And then if you use that combined meaning a real estate professional or doing the children rental loophole, right. Or if you make that $150,000, then you could use a lot of or a personal loss to go. And I’ve said it at the income.

00:22:31:19 – 00:22:56:05
Rod Khleif
Wow. Yeah. That’s fantastic. That’s fantastic. Well, you know, if, if the, if the government was spending our money wisely, I might not be so to paying taxes, but fuck that. I’m sorry. They’re squandering our money. Yeah. Good lord, the fraud and everything you see. But, But. So. Yeah. So you’re in and what’s. Okay, I see.

00:22:56:07 – 00:22:58:43
Rod Khleif
What’s your website? It’s about CPA.

00:22:58:47 – 00:23:03:09
Jason Malabute
Know. Real estate tax.

00:23:03:13 – 00:23:29:15
Rod Khleif
Com real estate tax. Pro com okay. All right I love it. And you know you even my CPA is not that well versed on on real estate. But I’ve had him for 30 years and and and he doesn’t do any planning whatsoever. And yeah I know, I know I know Jason maybe we should talk. But you know, I’m such a loyal guy that I don’t move on.

00:23:29:15 – 00:23:39:21
Rod Khleif
And I probably should have moved on a long time ago, but but yeah. So how can passive investors get the benefit of some of these things we’ve been talking about?

00:23:39:23 – 00:24:05:19
Jason Malabute
Yeah. So, so so for example, like I, we were talking about bonus depreciation. Right, right. So so so by default real estate investments are considered passive investment. Right okay. So so one strategy that we use specially for our syndication syndication.

00:24:05:21 – 00:24:06:41
Rod Khleif
And syndication. Right.

00:24:06:47 – 00:24:45:45
Jason Malabute
Syndication specifically more particular limited partners is it’s using timing. So so for example let’s say let’s say that you guys I’m investing right. You know like a year ago, you get to have a huge profit because they have added to to great investors in the, in the let’s say now you are looking into getting to New Deal. That’s using bulletproof Asian right.

00:24:45:49 – 00:24:48:13
Jason Malabute
Which has a big loss.

00:24:48:15 – 00:24:49:19
Rod Khleif
Right now.

00:24:49:19 – 00:24:55:45
Jason Malabute
What we could do is we could use that paper lot from you.

00:24:55:49 – 00:24:59:25
Rod Khleif
New new acquisition offset the gain from the previous one.

00:24:59:27 – 00:25:00:23
Jason Malabute
Yes. There you go.

00:25:00:25 – 00:25:00:37
Rod Khleif
Yeah.

00:25:00:39 – 00:25:01:29
Jason Malabute
Beautiful.

00:25:01:33 – 00:25:20:25
Rod Khleif
Beautiful. Yeah. No, that’s that’s a that’s a beautiful thing right there. No, I love it. Well, well, listen, Jason, I really appreciate you coming in and it’s great to see you again, my friend. And and so it’s real estate tax pro com. And and thanks for coming in and sharing some wisdom brother.

00:25:20:29 – 00:25:23:01
Jason Malabute
Thank you for having your platform. Right.

00:25:23:03 – 00:25:33:29
Rod Khleif
Okay. Of course. Good. Yeah. We all said yeah yeah yeah yeah. So so so were you out here for anything else?

00:25:33:31 – 00:25:34:11
Jason Malabute
No.

00:25:34:15 – 00:25:35:33
Rod Khleif
You came out just to see me.

00:25:35:35 – 00:25:36:15
Jason Malabute
Of course..

00:25:36:27 – 00:25:38:43
Rod Khleif
This is. Man, that’s a long way.

00:25:38:47 – 00:25:42:03
Jason Malabute
This is a once in a lifetime opportunity, right?

00:25:42:09 – 00:26:00:27
Rod Khleif
That’s kind of. That’s kind of you, man. What a what an honor. I mean, I’m humbled, buddy. That’s that’s real honor. Well, I, I will tell you that I don’t usually allow any promotion, but I put your website out there by design, my friend, because I like you.

00:26:00:29 – 00:26:01:39
Jason Malabute
Yeah.

00:26:01:43 – 00:26:20:11
Rod Khleif
But, yeah, I, I’m really honored that you would come this far to get on the show, but. And hopefully, hopefully I get you some some clients, buddy, I hope I hope I can help you with that and make me very happy. But. Yeah. So, so family’s good.

00:26:20:11 – 00:26:24:46
Jason Malabute
Everybody good. Everybody’s good. Man. Can’t complain like, like.