Investing in Real Estate to offset Ordinary Income with Depreciation
Is it worth going full-time in real estate just to offset business income with depreciation?
I own a business that's having a very high income year. I'm looking at a big tax bill and I've been told that if I qualify as a Real Estate Professional (REP), I can use depreciation from rental properties — especially bonus depreciation from cost segregation studies — to significantly offset my ordinary income.
The math seems compelling on paper, but I want to know if people have actually done this and whether it's as clean as it sounds. I dont need the earnings myself so I was thinking to invest all of it as a down payment on a mf building which would generate enough depreciation to offset all of the income.
Is this a strategy thats a red flag for audits and not worth the hassle? I also understand rental properties can require a lot of time but it seems to me like its worth the hassle once the income is over a certain amount. As long as the noi covers debt service for a few years it seems like a no brainer.
I'd genuinely commit to running it as a real business — not just on paper and spending most of my time on it. But I want honest takes from people who've done it, who've seen it work (or blow up). Thanks