{"id":103,"date":"2024-07-02T21:22:00","date_gmt":"2024-07-02T21:22:00","guid":{"rendered":"https:\/\/www.bourbonnaistax.com\/blog\/?p=103"},"modified":"2024-07-02T21:22:01","modified_gmt":"2024-07-02T21:22:01","slug":"more-social-media-secrets-revealed","status":"publish","type":"post","link":"https:\/\/www.bourbonnaistax.com\/blog\/more-social-media-secrets-revealed\/","title":{"rendered":"More Social Media Secrets Revealed"},"content":{"rendered":"
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Last week<\/a>, we looked at the Venn diagram with unlikely circles representing “social media influencers” and “sound tax advice.” If you missed it, you\u2019ll be shocked,\u00a0shocked<\/em>\u00a0to discover very little overlap. In most cases, narrators start with a valid concept, like hiring your kids, the Augusta Rule, or depreciating your truck. They hype it like they\u2019re ripping the lid off the Illuminati Vault of Tax Secrets. They whet your appetite with salacious headlines like, “write off 100% of the cost of your SUV!” Then they leave out important details like, “but only if you use it 100% for business,” and “you\u2019ll have to pay back some of that benefit when you re-sell it down the road.”<\/p>\n\n\n\n

But just in case you thought it was safe to open TikTok again, here\u2019s another example of a too-good-to-be-true social media tax claim that turns out to be, well, too good to be true.<\/p>\n\n\n\n

Specifically, there\u2019s a video floating around that promises, “How to avoid 100% of your income taxes every year.” It\u2019s called the “paper loss” strategy, and of course, to use it every year, you have to know the rules. Does avoiding 100% of your taxes every year sound good? Heck yeah! Here\u2019s the “secret”:<\/p>\n\n\n\n

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  1. Buy an investment property \u2013 it can be an Airbnb or a long-term rental.
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  2. As soon as you buy it, write off everything on the inside \u2013 appliances, tubs, cabinets, etc. This is a called a “cost segregation study,” and breaking those assets out really\u00a0does<\/em>\u00a0give you bigger up-front deductions because they depreciate over 5 years, rather than the usual 27.5 for residential real estate.
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  3. This creates a big enough loss to offset income from your W-2, your 1099s, your stocks, and your crypto.<\/li>\n<\/ol>\n\n\n\n

    Genius, right? Well, not so fast.<\/p>\n\n\n\n

    If your adjusted gross income is under $100,000, you can deduct up to $25,000 in rental real estate losses. As your AGI grows past $100,000, it starts phasing out until it disappears entirely at $150,000. Beyond that, you can\u2019t deduct real estate losses against ordinary income at all<\/em>, unless<\/em> you qualify under special rules as a “real estate professional.” Which you probably won\u2019t. Thousands of high-income W-2 employees and business owners buy real estate every year “for the tax breaks,” then discover they can\u2019t take them!<\/p>\n\n\n\n

    Even if you can<\/em> deduct your real estate losses, you\u2019re going to need to buy a lot<\/em> of property to offset your other income. Let\u2019s say your taxable income is $200,000 per year. Ordinarily, your first-year depreciation on rental real estate is about 1.8% of your depreciable basis in the property, which doesn\u2019t include land. A proactive cost segregation study might bump that up to, say, 5%. That means, to create $200,000 of deductible paper losses, you\u2019ll need to buy $4 million<\/em> of depreciable property \u2013 plus<\/em> land value. Can you even do<\/em> that on $200,000 of income? Are you sure you want<\/em> to do it, to save probably $40-50,000 per year in tax?<\/p>\n\n\n\n

    (Having said all that, the passive loss rule doesn\u2019t apply to property taxed as a business \u2013 i.e., an Airbnb. Of course, that\u2019s even more work than a plain old rental.)<\/p>\n\n\n\n

    So, does the “paper loss” strategy really avoid 100% of your taxes every year? Magic Eight Ball says, “My response is no.” It\u2019s perfectly legal. It just doesn\u2019t deliver what the influencer says it will. It\u2019s one of those things like communism, or The Matrix<\/em> sequels, that work in theory, but not in the real world.<\/p>\n\n\n\n

    Once again, have fun with the tax videos that pop up on your social media feed. But understand that most of them are more sizzle than steak. Happy scrolling!<\/p>\n\n\n\n

    <\/p>\n","protected":false},"excerpt":{"rendered":"

    Last week, we looked at the Venn diagram with unlikely circles representing “social media influencers” and “sound tax advice.” If you missed it, you\u2019ll be shocked, shocked to discover very little overlap.<\/p>\n

    But just in case you thought it was safe to open TikTok again, here\u2019s another example of a too-good-to-be-true social media tax claim that turns out to be, well, too good to be true.<\/p>\n","protected":false},"author":2,"featured_media":105,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[3],"tags":[45,47,4,10,11,9,44,46],"class_list":{"0":"post-103","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-taxes","8":"tag-realestate","9":"tag-socialmedia","10":"tag-tax","11":"tag-tax-reduction","12":"tag-tax-savings","13":"tag-tax-strategy","14":"tag-tiktok","15":"tag-writeoff","16":"entry"},"_links":{"self":[{"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/posts\/103","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/comments?post=103"}],"version-history":[{"count":1,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/posts\/103\/revisions"}],"predecessor-version":[{"id":106,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/posts\/103\/revisions\/106"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/media\/105"}],"wp:attachment":[{"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/media?parent=103"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/categories?post=103"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/tags?post=103"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}