The Challenge
In 2024, one of our investors, a high-income doctor and business owner, faced a familiar but daunting problem: taxes. Despite earning several million dollars annually through his medical practice and business ventures, traditional deductions and write-offs barely made a dent in his tax liability. Standard approaches such as stock investments or retirement contributions were not enough to meaningfully reduce his taxable income. He needed a strategy capable of offsetting seven figures of income while remaining fully compliant with IRS rules.
The Approach
Primior introduced the investor to one of our commercial real estate projects, an office building with long-term appreciation potential and a structure designed for maximum tax efficiency.
Step 1: Cost Segregation Study
We conducted a detailed cost segregation analysis to identify short-life assets such as flooring, fixtures, and other components eligible for accelerated depreciation.
Step 2: Bonus Depreciation Application
Leveraging current tax law, we applied 100% bonus depreciation on those short-life assets, enabling the investor to write them off entirely in the first year.
Step 3: Strategic Partnership Structure
The investor’s share of the property generated over $1.1 million in paper losses on his K-1 statement, losses that could be used to dramatically offset taxable income.
The Key Move: Real Estate Professional Status (REPS)
Ordinarily, most investors cannot use real estate losses to offset W2 or business income because such losses are considered passive. However, there is a key exception. If either the investor or their spouse qualifies as a real estate professional and materially participates in the management of the property, those losses can be classified as active.
In this case, the investor’s spouse was not employed full-time and took an active role in managing the property. Primior helped document her participation, track her hours, and confirm compliance with REPS standards. This allowed the couple to treat their real estate losses as active, unlocking a powerful tax advantage.
The Outcome
By combining advanced tax strategies with compliant structuring, Primior helped the investor achieve the following:
$1.1 million in taxable income eliminated
Over $400,000 in federal taxes saved
Full IRS compliance maintained through proper documentation and active participation
Conclusion: Turning Real Estate Into a Tax Shield
This case illustrates how thoughtful real estate structuring can transform a high-income earner’s tax outlook. Depreciation, cost segregation, and REPS qualification, when combined correctly, create one of the most effective IRS-compliant methods of reducing taxable income.
At Primior, we specialize in aligning real estate investments with strategic tax advantages to help investors preserve wealth and achieve long-term financial growth.
Disclaimer: This content is for educational purposes only. Primior is not a licensed tax advisory firm. Please consult your CPA or tax professional before implementing similar strategies.
