The Challenge
In 2024, one of our investors, a full-time insurance professional earning over $500,000 annually, faced the challenge of reducing his substantial tax burden. Despite having a strong investment portfolio, his W2 income kept him in one of the highest tax brackets. Standard deductions and passive investments did little to help. He needed a strategy that could generate legitimate, documentable paper losses and apply them directly to his active income.
The Approach
Primior introduced the investor to one of our real estate development projects. These types of projects often include significant upfront soft costs such as legal fees, architectural design, permitting, and engineering expenses. Under the tax code, these costs can be amortized over time, but with proper structuring, they can also be accelerated for maximum benefit.
Step 1: Leveraging Amortization of Soft Costs
We structured the deal to accelerate the amortization schedule, creating $250,000 in paper losses on the investor’s K-1. These deductions were fully documented, compliant, and executed within the boundaries of tax law.
Step 2: Spousal Participation and Real Estate Professional Status (REPS)
The investor’s spouse was not a passive partner. She actively participated in managing aspects of the project and worked closely with the Primior team. Through detailed documentation and time tracking, she qualified for Real Estate Professional Status. This allowed the couple to convert what would normally be passive losses into active losses that could directly offset W2 income.
The Outcome
By combining amortization with proper tax status qualification, the investor achieved significant and measurable results:
$250,000 in paper losses generated through accelerated amortization
Losses applied directly to W2 income
Six-figure tax savings realized while maintaining full IRS compliance
Conclusion: A Smart Use of Amortization and REPS
This case demonstrates how advanced structuring and strategic participation can unlock powerful tax advantages even for W2 earners. While most investors focus on depreciation, amortization can be equally effective when applied correctly.
With the right partnership structure and one spouse qualifying for REPS, active income can be legally reduced in a compliant and sustainable way.
At Primior, we help investors identify and apply these nuanced strategies to reduce tax exposure, preserve capital, and accelerate long-term wealth 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.
