1031 Exchange Tax Strategy for W-2 Filers and Real Estate Investors

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins breaks down the 1031 exchange process for W-2 earners and real estate investors. As a financial and tax advisor in the Dallas-Fort Worth area, Terrence explains how this strategy helps defer capital gains taxes and maximize tax savings.

What You’ll Learn:

• 1031 Exchange Basics: What it is, how it started, and why the IRS incentivizes real estate reinvestment.
• Key Rules for Success: Same taxpayer requirement, qualifying property types, and investment holding periods.
• Timelines to Remember: 45 days to identify new properties and 180 days to close the transaction.
• Qualified Intermediary Requirement: Why you need a neutral third party to handle funds.

Key Tax Considerations:

• Boot and Gain Recognition: Understanding when you might owe taxes during the exchange process.
• Depreciation and Basis Tracking: How to keep accurate records across multiple property exchanges.
• Advanced Techniques: Reverse exchanges, split basis elections, and combining Section 1031 with Section 121 for mixed-use properties.

Featured Tax Story:

Declean vs. Commissioner (2000) – A real-life example of a taxpayer who lost a tax court case for improperly handling a 1031 exchange.

For more tax-saving tips, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts. Smart tax planning means keeping more of what you earn. Have questions? Email [email protected] and we’ll answer them in future episodes.

Real Estate Tax Strategies for W-2 Earners

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins explains how W-2 earners can use real estate to reduce their tax burden. As a financial and tax advisor in the Dallas-Fort Worth area, Terrence breaks down three key strategies that allow employees to offset income with real estate losses and maximize tax savings.

What You’ll Learn:

• Real Estate Loss Deductions: How W-2 earners making less than $150,000 can deduct up to $25,000 in rental losses.
• Short-Term Rental Strategy: How properties rented for an average of seven days or less can bypass passive loss limitations and offset W-2 income.
• Real Estate Professional Status (REPS): How you or your spouse can qualify as a real estate professional to unlock additional tax-saving opportunities.

Key Tax Considerations:

• Material Participation Rules: Understanding how to meet the IRS's participation thresholds to deduct real estate losses.
• Grouping Elections: How combining multiple rental properties for tax purposes can impact deductions and future tax liability.
• Audit Risks and Compliance: Lessons from tax court cases where taxpayers failed to properly document their real estate hours and losses.

Featured Tax Story:

A look at past IRS cases where taxpayers attempted to claim real estate professional status or passive losses without meeting the necessary requirements—and what you should do differently to stay compliant.

For more actionable tax tips, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts. The key to effective tax planning isn’t just reducing your bill—it’s keeping more of what you earn.

Real Estate & Taxes: How Short-Term Rentals Can Offset Your W-2 Income

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins, a financial and tax advisor in the Dallas-Fort Worth area, explains how W-2 employees can leverage short-term rentals (STRs) to reduce their taxable income. Many new real estate investors expect immediate tax benefits—only to be caught by the passive activity loss rules. But by structuring rentals strategically, you can unlock deductible losses to offset your W-2 earnings.

Terrence covers:

• The three exceptions that allow real estate losses to offset W-2 income.
• The 7-day rule that distinguishes short-term rentals from passive real estate.
• Material participation tests and why tracking your hours is critical.
• The cost segregation study strategy to accelerate depreciation and maximize tax savings.
• The QBI deduction and how rental profits can qualify for an extra 20% tax deduction.

Featured Tax Fact: In the 1985 case Moss v. Commissioner, a group of attorneys tried to deduct their daily lunch meetings as a business expense. The IRS ruled against them, emphasizing that meals must be directly related to business—so no, your daily lunch with colleagues doesn’t qualify!

For more real estate tax strategies, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts. And remember: Keep More of What You Earn!

How Real Estate Can Lower Your Tax Bill as a W-2 Filer

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins dives into tax strategies tailored for W-2 filers who are real estate investors. As a financial and tax advisor in the Dallas-Fort Worth area, Terrence shares actionable tips to help you leverage real estate to grow your wealth while reducing your tax burden.

What You’ll Learn:

• The BRRRR Strategy: How the "Buy, Rehab, Rent, Refinance, Repeat" method accelerates real estate portfolio growth and provides tax advantages.
• Return on Equity: Why targeting a 5% return on equity is key to achieving financial independence through real estate.
• Short-Term Rentals: How IRS rules on rentals averaging fewer than seven days can allow you to offset W-2 income with real estate losses.
• Cost Segregation Studies: Breaking down your property into depreciable components to maximize tax deductions, including accelerated depreciation benefits available in 2025.
• Financing Strategies: Creative ways to fund your real estate investments, including leveraging life insurance policies and stock portfolios tax-efficiently.

Featured Tax Story: Terrence highlights a 2004 tax court case, Robert P. Sweet vs. Commissioner, where the IRS incorrectly classified a rental property. The couple’s victory underscores the importance of proper record-keeping, understanding the tax code, and working with knowledgeable professionals to protect your earnings.

For more actionable tax tips, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts. Remember: it’s not just about lowering your taxes—it’s about keeping more of what you earn!

How Your Home Can Lower Your Tax Bill

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins explains how your primary residence can help you save on taxes and even increase your income. As a financial and tax advisor in the Dallas-Fort Worth area, Terrence breaks down practical strategies to make your homework for you.

What You’ll Learn:

• Itemized Deductions: How property taxes, mortgage interest, and prepaid points can maximize your tax savings.
• House Hacking: Renting out part of your home to generate income and create tax advantages through depreciation.
• Capital Gains Exclusions: Sell your home tax-free by meeting the IRS’s 2-out-of-5-year rule, and strategies to reduce taxable gains further.
• Rental Conversions: Special considerations for depreciation recapture and options like the 1031 exchange.

Featured Tax Story: A couple's missteps in claiming land as a business expense and the lessons learned about proper tax classifications.

For more actionable tax tips, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts. Remember: it’s not just about lowering your taxes—it’s about keeping more of what you earn!

"Real Estate Investing for High-Income Earners: Strategies to Maximize Tax Benefits"

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins explores how real estate investing can offer significant tax advantages for high-income earners. With his experience as a financial and tax advisor in the Dallas-Fort Worth area, Terrence shares actionable insights to help listeners navigate the complexities of real estate taxation.

Terrence covers:

• The Three Buckets of Income: Active, passive, and portfolio income—and how understanding these categories impacts your tax strategy.
• Real Estate as Passive Income: Why rental properties are typically considered passive activities and how this classification affects your ability to deduct losses.
• Depreciation Deductions: Key benefits of deducting property value over time, including residential and commercial property lifespans.
• Offsetting Income with Real Estate Losses: Strategies for utilizing passive losses to reduce tax liability, including income thresholds and real estate professional status.
• Tax Planning Year by Year: The importance of tracking losses and adapting strategies to maximize deductions in future tax years.

Featured Tax Story: A 1981 tax court case where Dr. Arthur Pervsner attempted to deduct his entire Beverly Hills mansion as a business expense. The court ruled he could only deduct spaces used exclusively for business, underscoring the need to justify your claims.

For more tips on reducing your tax bill, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts. Remember, it's not just about lowering your taxes—it's about keeping more of what you earn!

"Depreciation and Business Credits: Tax Strategies to Lower Your Bill"

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins breaks down two powerful tools for business owners: depreciation and business credits. He explains how these tax strategies can significantly reduce your taxable income and help you keep more of your hard-earned money.

Terrence covers:

• Depreciation: What it is, how it works, and how to decide between Section 179, bonus depreciation, and MAKERS.
• Business Credits: Key credits like retirement plan startup credits, research and development credits, energy investment credits, and more.
• Strategic tips on when to depreciate assets upfront versus spreading deductions over time.

Plus, hear the surprising story of how a bodybuilder successfully deducted baby oil as a business expense—proving that justifying your deductions can make all the difference.

Featured Tax Fact: In the 1980s, a professional bodybuilder successfully claimed baby oil as a deductible business expense because it enhanced his competition performance.

For more self-employment tax tips, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts.

"Maximize Your Tax Savings with QBI and PTET Strategies"

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins, a financial and tax advisor in the Dallas-Fort Worth area, unpacks two critical tax-saving strategies for business owners: the Qualified Business Income (QBI) Deduction and the Pass-Through Entity Tax (PTET). Whether you’re a small business owner, freelancer, or entrepreneur, these strategies can make a significant difference in how much of your hard-earned income you get to keep.

Terrence breaks down:

• What qualifies for the 20% QBI deduction and how to determine if your business is considered a Specified Service Trade or Business (SSTB).
• Income thresholds that may phase out your eligibility for QBI, and the unique tests for high earners.
• How aggregating multiple businesses can maximize your tax benefits.
• The PTET election as a workaround for the $10,000 SALT deduction limit and how it can save business owners thousands.

Featured Tax Fact: Did you know England once taxed windows? Starting in 1696, homeowners paid taxes based on the number of windows in their homes, leading many to brick them up. This quirky tax lasted over 150 years before being repealed in 1851.

For more tips to keep more of what you earn, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts.

"The IRS says a business must have a profit motive, but that doesn’t mean you can’t enjoy tax deductions along the way."

In this episode of How to Lower Your Tax Bill, Terrence dives into tax-saving strategies for self-employed individuals. He explains how freelancers, small business owners, and side hustlers can take advantage of tax deductions for business travel, meals, and vehicles.

Terrence covers key topics like ordinary and necessary expenses, documenting business travel, and maximizing deductions on vehicles. He also offers strategies for planning corporate retreats and how to properly track your mileage.

Featured Tax Fact: In a 1981 case, Elvis Presley's estate lost a tax battle trying to deduct bodyguard expenses.

For more self-employment tax tips, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts.

"Even if you're an employee, there are still tax strategies you can use to save money."

Terrence Hutchins, a financial and tax advisor, returns to How to Lower Your Tax Bill to discuss essential tax strategies for employees. He highlights common deductions, tax credits, and tips for employees with limited options, such as teachers, students with loans, and those with medical expenses.

Terrence explains how to leverage tax credits, such as the Earned Income Credit and Child Tax Credit, and offers actionable advice, like using HSAs for future savings and medical expense deductions.

Featured Tax Fact: Did you know you can deduct cat-related expenses for fostering cats? A 2011 case made it possible.

For more self-employment tax tips, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts.