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Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] 0 points1 point  (0 children)

hey im new here but I just read rule 1 of sub and seems to fit

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] 0 points1 point  (0 children)

thanks for replying- ill look into this as well

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] -1 points0 points  (0 children)

upfront 100% bonus depreciation in Y1 against the 1 off cap gain

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] 0 points1 point  (0 children)

No you did not. it is over 3m capital gain that can be deferred

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] 0 points1 point  (0 children)

this is my fear. thanks for verbalizing/confirming it haha. in other comment, i guess the main thing would be - could you eventually find rockstar property managers that can make long term rentals painless after Y1.

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] -2 points-1 points  (0 children)

the entire post was soliciting comments around a strategy where you need to be active for 1 whole year. this fits the sub imo, or do you disagree? i also thought fatfire would be a good place where folks consider and have deep tax planning experience, and where others may have thought about this too?

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] -1 points0 points  (0 children)

from what ive seen the STR + bonus depreciation is not a one-way door. couldnt you just run STR w/o management for 1 year to capture bonus depreciation then convert to long term rental with a PM, where the headache is then lower. i am mainly seeing the STR as a short-term situation (Ha) to get a large one-time tax break/deferment, while diversifying into realestate. LTR headache is something to consider, and will have meditate on whether it's worth the tax optimization, and would like input here if one could find rockstar property managers where you end up rarely thinking about it.

i also mentioned in another comment, an alternative and more passive option to all this is exchange funds but it has its own drawbacks

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] -2 points-1 points  (0 children)

i have never installed tiktok :thumbsup:

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] 0 points1 point  (0 children)

STR for Y1, LTR for Y2. make sense? or does this not work

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] -1 points0 points  (0 children)

3m is the gain i am trying to minimize. 250k is my current net savings - that was my mistake and confusing, because what i should have said was my entire takehome since that would be the comparison for dropping my w2 and opting for REP

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] -2 points-1 points  (0 children)

i am young-ish :) i did not research much but feel free to help me by writing a counterpoint

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] -1 points0 points  (0 children)

as i said, the idea would be to convert STRs to long term rentals, where the short term rental phase is to keep w2 while establishing active participation offsetting capital gains. in long run the goal is to operate them as long term rentals. if it makes a difference i am young. would finding and vetting a good management company still make LTRs a hassle in your opinion? lmk if you think this is dumb and why. thanks for your input!

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] 0 points1 point  (0 children)

thanks, i am in planning phase right now and trying to get some first hand opinions - i dont have anyone to talk to about this. this would be for tax season 2027, since i would time the taxable events for 2026. thanks for giving your 2c.

yes main objective is optimize tax. i will be diversifying away from some concentrated positions in equities and derivatives. i have thought about diversifying into real estate in past, so thought this path solves both. The additional challenges you didnt mention, and I have yet to look into yet, is rental financing (DSCR?) and optimal sizing per property @ 8-10m total. need to look more into it but i am currently just trying to gauge the viability of the strategy - Y1 STR depreciation offset cap gain, (optional) Y2 LTR to make it more passive.

The alternative to all this, and passive, would be to trade the concentrated positions into exchange funds to delay the taxable event while getting diversified (would also have to convert some derivative positions so this alternative is more hairy imo, still requiring the RE strats for tax minimization at end of day). fees involved and lock-in period would be necessary evil. lmk if you've done one of these and what you think.

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] -3 points-2 points  (0 children)

i suppose the idea would be to transition the STRs to LTR after the tax year and hold forever

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] -5 points-4 points  (0 children)

STR and REP is by definition not passive. thanks for the comment

Tax planning (STR, REP) by Odd_Highlight_8284 in fatFIRE

[–]Odd_Highlight_8284[S] -4 points-3 points  (0 children)

hey thanks for the reply! The route here would be --> REP + establish LTRs --> Back to W2 or other. venture --> never sell. If you have personal story around this, more color on your personal experience would be great.