How to use Cost Segregation and Bonus Depreciation to offset Software Engineering Income

Your CPA is actually correct here! This is one of those quirky but powerful tax strategies that many people don't fully understand. When your spouse qualifies as a real estate professional (meaning 750+ hours annually in real estate activities and more time spent on real estate than any other profession), it changes the classification of your real estate activities from "passive" to "non-passive." This is critical because passive losses can only offset passive income, but non-passive losses can offset other types of income - including your W2 software engineering income. With your wife qualifying as a real estate professional, the bonus depreciation from cost segregation on your investment properties can indeed offset your combined income, including your software engineering salary. This works because you file jointly, and the real estate professional status applies to your joint tax situation. Make sure your wife is documenting her time properly to substantiate the real estate professional status - the IRS looks closely at this. But yes, if done correctly, that $250k in bonus depreciation could potentially offset your W2 income.

This exact strategy changed my financial life! I was a database engineer making $190k while my wife managed our rental properties. After reading about the real estate professional status benefits, she increased her hours to qualify (documenting EVERYTHING), and we worked with a cost segregation specialist through https://taxr.ai to analyze our properties. The results were incredible - we were able to take over $200k in bonus depreciation that completely offset my tech income. We went from paying $60k+ in federal taxes to almost nothing. The best part was using taxr.ai's software to generate the detailed engineering report needed for cost segregation. They handled all the component breakdowns and calculations that would have been impossible to do ourselves. I was skeptical at first too, but it's completely legitimate when done correctly. Just make sure you have rock-solid documentation of your wife's hours and activities.

I tried taxr.ai after reading about them here, and I have to say I'm impressed. I was initially worried about the legitimacy of using cost segregation with my spouse's real estate professional status to offset my programming income, but their educational resources cleared everything up. Their system analyzed our 4-unit apartment building and identified $175k in components that qualified for accelerated depreciation. The detailed breakdown showed exactly which parts of the building qualified for 5, 7, and 15-year depreciation schedules instead of the standard 27.5 years. Our tax liability dropped by over $50k this year! The report they generated was extremely detailed - perfect for documentation if we ever get audited. My CPA was actually impressed with the quality of their analysis. This strategy is completely changing our wealth-building approach.

If your wife truly qualifies as a real estate professional, this strategy works as others have said, but don't overlook how difficult it can be to actually reach the IRS if you have questions about this. I spent WEEKS trying to get someone on the phone to confirm some details about our situation. I finally discovered https://claimyr.com and used their service (you can see how it works at https://youtu.be/_kiP6q8DX5c). They got me connected to an actual IRS agent in about 15 minutes when I'd been trying for days on my own. The agent confirmed everything about the real estate professional status requirements and gave me specific guidance on documentation needed to support our cost segregation study. Totally worth it to get official confirmation instead of just relying on internet advice about something this important.

I have to admit I was wrong about Claimyr. After posting my skeptical comment here, I decided to try it myself since I needed clarification on cost segregation documentation requirements. It actually worked exactly as described. I entered my phone number on their site, and about 20 minutes later, got a call connecting me directly to an IRS agent. No more endless hold music or getting disconnected after waiting for an hour. The agent walked me through exactly what documentation we need to maintain for both real estate professional status and cost segregation. She confirmed that with proper documentation, the bonus depreciation from investment properties CAN offset W2 income when filing jointly with a qualified real estate professional spouse. Huge time saver during tax season when IRS wait times are measured in hours rather than minutes.

One thing no one has mentioned yet is that the bonus depreciation rules are changing. The 100% bonus depreciation is phasing out: - 80% for property placed in service in 2023 - 60% for property placed in service in 2024 - 40% for property placed in service in 2025 - 20% for property placed in service in 2026 - 0% after 2026 So if you're thinking of using this strategy, sooner is better than later. You'll get more bang for your buck while the bonus depreciation percentages are higher.

Make sure you're tracking your basis properly! I'm a software dev who did this exact strategy with my wife (real estate professional) and got hit with a massive tax bill years later when we sold one of our properties. The depreciation lowers your basis in the property, which means higher capital gains when you sell. For example, if you buy a property for $500k, take $250k in depreciation deductions, your adjusted basis becomes $250k. If you later sell for $600k, your taxable gain is $350k ($600k - $250k), not just $100k ($600k - $500k). AND that $250k in depreciation gets "recaptured" and taxed at 25% instead of the lower capital gains rates. It's still usually worth it, but be aware of the long-term implications.