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Discover how real estate losses can help reduce your passive tax liability in 2024

Updated: Jun 26

How to reduce passive tax liability with real estate losses

Understanding Passive Tax Liability

Passive tax liability refers to the taxes an individual or business owes on income derived from passive activities, such as real estate investments. Recognizing and managing this liability is crucial for effective tax planning and minimizing overall tax obligations.

Strategies to Reduce Passive Tax Liability

Several strategies can help you reduce your passive tax liability, thereby retaining more of your income. One powerful approach involves leveraging real estate losses to offset passive gains.

Utilizing Real Estate Losses to Offset Gains

As a passive real estate investor, you can use losses from your properties to offset your passive income, thus reducing your tax burden. One of the primary methods for generating such losses is through depreciation. Depreciation allows you to deduct the cost of your investment property over time, lowering your taxable income. With the introduction of the Tax Cuts and Jobs Act in 2018, a new benefit called bonus depreciation became available. This provision allows investors to deduct a significant portion of the cost of qualified property improvements in the first year.

Taking Advantage of Bonus Depreciation

Bonus depreciation is a valuable tax incentive that enables investors to deduct up to 60% of the cost of qualified property improvements in the first year of ownership. This can lead to substantial tax savings and effectively reduce your passive tax liability.

Partnering with Real Estate Investment Experts

Partnering with a real estate investment firm that specializes in maximizing tax benefits can be highly advantageous. For example, companies like Fort + Home Capital co-own properties with their investors, ensuring that tax benefits from depreciation and bonus depreciation are fully utilized.

Benefits of Partnership

  1. Shared Ownership Benefits: Co-owning properties with an investment firm can ensure that the tax benefits from depreciation and bonus depreciation are maximized.

  2. Tax Incentives: Leveraging the expertise and resources of a specialized investment firm can help investors take full advantage of IRS-approved tax incentives, reducing their tax liabilities.

  3. Diversification and Efficiency: Investing with experts allows for diversification of your portfolio while ensuring tax efficiency, optimizing both returns and tax savings.

Planning for Tax Efficiency in 2024

  • To reduce your tax liability in 2024, it's essential to start planning now. An investment firm can assist in developing a comprehensive tax planning strategy that maximizes savings.

  • Early Planning: Begin strategizing your tax planning early in the year to ensure all available deductions and incentives are utilized.

  • Collaborative Approach: The firm’s accounting team can work with your personal accountants to ensure a seamless integration of tax strategies.

  • Maximized Savings: By planning ahead, you can minimize your tax liabilities and optimize your investment returns.


Consult with Tax Professionals

While investment firms provide valuable strategies for reducing passive tax liability, it’s important to remember that they are not tax professionals. We strongly recommend discussing your specific situation with your accounting and legal tax team to ensure that you are fully informed and compliant with all tax laws and regulations.


Understanding and managing your passive tax liability is critical for effective financial planning. By leveraging strategies like depreciation and bonus depreciation, and partnering with real estate investment experts, you can significantly reduce your tax burden and enhance your investment returns. Start planning today to ensure tax efficiency and maximize your financial benefits in 2024. Always consult with your tax professionals to tailor these strategies to your specific circumstances.

How to reduce real estate losses

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