If you’re looking to pay ZERO federal Income tax then this episode is for you. Isaac Weinberger joins the Passive Cash Flow Podcast and breaks it down. He is a visionary tax advisor and Cost Segregation Expert Advisor, whose mission is to help property owners reduce tax liabilities and build meaningful connections in the real estate industry. Specializing in cost segregation, he strategically allocates property costs to accelerate tax deductions, having helped clients offset over $200,000,000 in tax liabilities.
Beyond his professional accomplishments, Isaac is passionate about networking and fostering relationships within the real estate community. He’s a recognized figure invited to share insights on podcasts and live shows. Isaac is also the founder of “Tuesday Connections,” a virtual real estate networking event. He is dedicated to assisting clients by helping them find equity, secure off-market deals, and foster beneficial partnerships. In essence, Isaac is more than an expert; he’s a friend, advocate, and connector committed to maximizing tax benefits and building lasting relationships in real estate.
#federalincometax #realestatetax #costsegregation
0:00:00 – Introduction & The Trump Tax Strategy
0:05:05 – The Unique Value of Cost Segregation
0:10:08 – Why Real Estate Tax Incentives Exist
0:15:00 – Understanding Real Estate Professional (REP) Status
0:20:28 – The “Lazy 1031” & Bonus Depreciation Changes
0:25:05 – The History & Future of Bonus Depreciation
0:30:10 – Economic Benefits & Final Thoughts
0:33:01 – How to Connect with Isaac Weinberger
Contact Info:
website: isaacweinberger.madisonspecs.com
Email: iweinberger@madisonspecs.com
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Transcript:
00:00:00:02 – 00:00:19:15
Isaac Weinberger
A few years ago, Trump announced tweeted that he paid $750 that year in federal income tax. People were up in arms and really, really not happy. When you do a car, second, you do 1031 exchanges. There’s no reason if you have enough property to be paying federal tax. I always ask why the Trump even pay seven. To me, you should pay zero.
00:00:19:17 – 00:00:30:18
Isaac Weinberger
So he got away with that legally by doing cost segregation studies and 1031 exchanges. You can do it too.
00:00:30:20 – 00:00:43:24
Aaron Fragnito
All right, ladies and gentlemen, welcome back to the Passive Cash Flow podcast. I’m your host, Aaron Frank Nieto, and we have an interesting guest here today. We have Isaac Weinberger. How are we doing today, Isaac?
00:00:44:01 – 00:00:48:10
Isaac Weinberger
We’re doing well when I’m chilling with Aaron. All is good.
00:00:48:12 – 00:01:08:24
Aaron Fragnito
Thank you, my friend. Thank you. The tax professional, the specialist, the, LinkedIn celebrity here. Oh, my gosh, what a hot topic on the internet. You are. You are the pro of helping people avoid paying their taxes. That’s why you’re on the Passive Cash Flow podcast today. My friend.
00:01:09:01 – 00:01:26:03
Isaac Weinberger
Appreciate you inviting me on air. I’m not I’m not as big as you’re making it sound. Try to stay humble, Thank god. Definitely get to connect with some some great guys in the space and help them out. Save a lot on taxes. And I’m so excited today to share that with the audience.
00:01:26:05 – 00:01:44:06
Aaron Fragnito
Absolutely. My friend. Absolutely. And by the way, to our listeners, as you know, here on the Passive Cash Flow podcast, we have tons of exciting guests on that. Talk about how to build your wealth and diversify your wealth. Often in real estate, tax specials like we have today. So if you’re enjoying this content, make sure you, share it with a friend.
00:01:44:08 – 00:02:03:12
Aaron Fragnito
You like it on the podcast platform or on YouTube that you’re watching us here, and you could subscribe as well. We come up with a new, podcast now every two weeks. So, be sure to check us out there. And we’re putting out a lot of more content on YouTube these days. So you can follow us there on YouTube, People’s Capital Group or the Passive Cash Flow podcast.
00:02:03:14 – 00:02:23:05
Aaron Fragnito
And, so, Isaac, let’s get into it here, my friend. You know, we’ve had different tax specialists before on the show here and we’ll, we’ll go over what a cost segregation study is in a few minutes to remind our listeners, if they hadn’t caught some of those past episodes from a while ago. But before we get into that, you know, we use you for our cost savings.
00:02:23:05 – 00:02:38:14
Aaron Fragnito
And that’s why I want to have you on here as well. We we actually, you know, bring on companies that we really select to work with. So we know they’re good companies. What separates you from other, cost seg companies out there? What makes you guys different?
00:02:38:16 – 00:02:57:14
Isaac Weinberger
I love that question. It gives me the opportunity to to really delve in and teach guys like you in the audience exactly what’s really at stake. And yes, I say what’s really at stake because cost seg is not just a cherry on top. I’m a big believer the cost egg is a solid appetizer might not be the main course.
00:02:57:17 – 00:03:22:04
Isaac Weinberger
That title insurance is extremely important, but cost seg if played right. If you play it the right way, you play your cards right, you can leverage it to raise money, so on and so forth. So the minute synopsis I always like to give new prospects is that historically, cost seg is not a relationship based item, and it’s not either an item that is really expounded upon.
00:03:22:05 – 00:03:36:11
Isaac Weinberger
It’s really, hey, I bought this property for x dollar X amount of dollars. We’re going to go do a cost. I call it a day. See you next time. Similarly to walking into Walmart buying your case of water when you finish it, you gotta go back and buy a new one, right? My go to target you might go to Walmart.
00:03:36:12 – 00:03:54:21
Isaac Weinberger
Doesn’t really matter. The water is the same. Folks out there think that cost seg is cookie cutter. I’m a big believer that cost is the farthest thing from a cookie cutter item. I think it’s actually the opposite when it comes to let’s let’s talk about title insurance for a second. That that really doesn’t change from one property to the next.
00:03:54:21 – 00:04:13:01
Isaac Weinberger
Obviously, there could be liens, there could be foreclosures. But in terms of ensuring the property, it’s very, very similar when it comes to cost SEG, you could have one guy person purchase one, two, three Main Street and you have another guy purchase one, two, three Main Street with the same exact price and same exact date. But one guy would benefit from a cost and one guy would it?
00:04:13:03 – 00:04:31:11
Isaac Weinberger
One guy’s going to benefit because he’s a real estate professional, which we’ll talk about. Another guy won’t benefit because he’s not a real estate professional. One guy will benefit because he has a tax liability and his investors want it. One guy won’t. Having a guy who really understands the nuances, details of the INS and outs of cost is so, so important.
00:04:31:13 – 00:04:58:02
Isaac Weinberger
And something that I brought to the table, which maybe we’ll talk about later as well, is something that I’ve taught my clients, how they how they use the depreciation benefits to leverage and raise equity. Because if you can go to a potential investor and tell them, hey, you’re going to get X amount of dollars of losses per this amount invested, not only does it make them happy, but it gives them the ability to potentially invest more, or it gives them the ability to invest more in the next deal.
00:04:58:04 – 00:05:20:07
Isaac Weinberger
Right. Also gives them the ability to choose between two deals that have the same IRR and cash flow projections, but one is more depreciation benefits for the next that that could be a game changer. So teaching my guys exactly how to leverage it in every single scenario. Talk about pre rental post rental. And when it comes to commercial properties ship qualified improvement property.
00:05:20:07 – 00:05:35:24
Isaac Weinberger
There’s. So I could talk about concept for days. Having a guy that really knows the ins and outs and we’ll go to bat fight land values to make sure that you get every single ounce of depreciation. That’s something you’re not going to get everywhere. On top of that, just try to provide as much external value as possible.
00:05:36:01 – 00:06:00:21
Isaac Weinberger
Host events. Sponsor clients. Events. Really be there, not just be a taker. So, trying to revolutionize the space. Thank God I get to work with some great guys like Aaron. Some local guy, some national guys, some big firms. Thank God we picked out a few, picked up a few, multibillion dollar investment firms. And, it’s been a true honor, and I love doing what I do.
00:06:00:21 – 00:06:06:01
Isaac Weinberger
I try to be honest, and bring my best game every single day.
00:06:06:03 – 00:06:23:16
Aaron Fragnito
I can see that, you know, you’re a very good businessman. You know, I’ve enjoyed our business relationship and, the lunches and the the, little gadget you send me in the mail and stuff, you know, it’s you’re very good at what you do. And, you know, it’s. I can take a page out of your book.
00:06:23:16 – 00:06:42:11
Aaron Fragnito
In fact, with what I do to, you know, building relationships with investors and so on, it’s. You always seem to be on the forefront, whether it’s I’m clicking on the LinkedIn or I’m charging my phone with the wireless, charger you sent me, or just, enjoying some sushi here. That was some very good, sushi. The best of, Lakewood, new Jersey.
00:06:42:11 – 00:07:00:17
Aaron Fragnito
They’re very excellent. Although got me off the keto diet and, probably my carb intake for the day and got me out of ketosis and took me probably good two days to get back into it. But, you know. Yeah, it’s all your fault. Yeah. So, between fasting, though, and, my keto, I think I’m back on track.
00:07:00:17 – 00:07:21:08
Aaron Fragnito
Except for the wedding I was at yesterday. That was. That was not good. So, anyway, ketones, you know, two steps forward, one step back. That’s a whole different podcast. So let’s, let’s break into it here, you know, we’ve, we’ve kind of, like I say, covered a little bit. You know, what I want to get into is the nitty gritty here of, cost segregation study.
00:07:21:08 – 00:07:42:17
Aaron Fragnito
You know, a lot of people don’t even realize the the value over the benefit of it, either. I mean, when I started, you know, raising capital to buy apartment buildings, I didn’t even talk about the tax benefits because I didn’t really fully understand them. I thought, oh, you just get straight line depreciation. You know, you break it out over 37 years or 27 years, depending on, you know, what it is, or 39 years or 20, you know.
00:07:42:17 – 00:08:04:20
Aaron Fragnito
But then I started realize, wait a minute, you can get a study done and you can frontload a bunch of tax depreciation, and get a huge tax write off in the calendar year that you buy that property and, use those tax write offs to write off other gains, you know, which is essentially what a cost segregation study is.
00:08:04:20 – 00:08:25:11
Aaron Fragnito
So, but I want to get right into the heart of it here, because what confuses investors is the passive, tax bucket and the active tax bucket. Right? I have people come to me all the time and they say, hey, I’m, I’m a doctor, and I earn half $1 million a year, and, you know, I get nailed on my W-2 taxes.
00:08:25:16 – 00:08:48:06
Aaron Fragnito
Can I use you know, I see your advertised, and so you get a 25% tax write off. So on $100,000 investment, that means I get a $25,000 tax write off in the year that I invest. Like that’s incredible. Does that mean I can use that $25,000 tax write off to wrap my W-2? And I have to explain to them the different tax buckets and, disappoint them a little bit.
00:08:48:06 – 00:09:10:04
Aaron Fragnito
But there’s different kind of rules and regulations. They’re different ways around it. So let’s break into those tax buckets if we can. And I’ll let you speak with your tax wisdom here. About the different types of tax write offs. You know, if you’re an active you know, you you own a business, you’re getting tax on your active gains.
00:09:10:04 – 00:09:23:15
Aaron Fragnito
And here you are investing in a syndication is is a limited partner. Is an LP getting passive tax write offs. How can you marry those. Is there any way to marry them or you forever separate in different tax buckets. Okay.
00:09:23:15 – 00:09:48:20
Isaac Weinberger
Go I love it. This is a very, very important conversation. But first we’re going to pause for a station identification break to give a shout out, to Pcgg to, to the audience that that will be listening to this podcast. Pcgg, our multifamily syndicators, led by my good friend Aaron, over here, the host. And if you’re looking to play some cash, Aaron is an honest and good man.
00:09:48:22 – 00:10:08:17
Isaac Weinberger
I met him, I dealt with him, and there’s a dime a dozen when it comes to syndicators. Somebody who’s going to really, trust your money and deal with your money as if it’s his own, somebody that you can really trust. Just a good man. Definitely. Guys that you should be talking to. That’s number one.
00:10:08:20 – 00:10:29:02
Isaac Weinberger
In terms of your question. Let’s begin like this. And we’re going to get into your question in a second. I always like to start off by saying, A few years ago, Trump announced or tweeted that he paid $750 that year in federal income tax. People were up in arms and really, really not happy. And they shouldn’t be happy you cheated the system.
00:10:29:02 – 00:10:51:12
Isaac Weinberger
The answer is anybody knows real estate. Trump did illegally with the government’s permission and they’re actually for it when you do a car. Second you do 1031 exchanges. There’s no reason if you have enough property to be paid federal tax. I always ask why the Trump even pay seven for me. You should pay zero. So he got away with that legally, by doing cost segregation studies in 1031 exchanges.
00:10:51:18 – 00:11:14:04
Isaac Weinberger
You can do it too. You want to save money on federal income tax? You can do cost seg. You can buy properties, invest in deals. And hopefully if you meet the criteria criteria, you could not qualify as well. That being said, the reason why the government does this is because the more they incentivize owners like Aaron and others to buy real estate, the machine is just oiled more and more.
00:11:14:10 – 00:11:36:05
Isaac Weinberger
So you’re going to take out loans interest. Interest is going to be charged. The banks are rolling everything is working in sync. So the more they incentivize folks, the more deals there are to be made. Properties trade hands, banks lend out money, everything is great. So you’re not cheating a system. You’re actually doing everybody a favor. So?
00:11:36:05 – 00:11:53:05
Isaac Weinberger
So keep at it. And this is the this is the way to do it. The second thing I always like to say is if I saw you walking down the street, okay, I’m going to make believe John is listening to this podcast. Maybe there will be a John podcast with John. I’m talking to you. You’re walking down the street and I say to you, John, I owe you $100.
00:11:53:05 – 00:12:08:15
Isaac Weinberger
Yes, I forgot to pay you back. I have two ways of I’m going to give you two options. I’m going to pay you back number one. I’m going to give you ten bucks a year for the next ten years. The second option is I’m going to give you $30 year one. And whatever the number is, $97 over the following nine years.
00:12:08:16 – 00:12:28:02
Isaac Weinberger
Okay. Obviously you’re going to pick 30 year one. You’ll take that money, buy some pencils on Amazon for profit. Boom. You got some ROI in your pocket. You got a nice return on investment. A dollar today is worth more than a dollar tomorrow. So essentially you’re getting the same amount of money at the end of the day. But it’s a time value money play.
00:12:28:02 – 00:12:49:18
Isaac Weinberger
That’s what cost segregation is. I’m not creating more depreciation for you. What I’m doing is I’m frontloading depreciation for you to give to yourself and to your investors and your partners. Lower, the federal income tax rate on your NOI get better returns to your investors by getting the depreciation benefits, being more well capitalized by another deal.
00:12:49:20 – 00:13:11:05
Isaac Weinberger
That’s the idea of a classic time value money. After we introduced that concept for the newbies or even guys that have been in the game for a long time and are not very well familiar with this concept, just something to take note of in regards to IRAs question. It’s something that’s it’s extremely vast, but I’ll try to simplify it for you guys, as much as humanly possible.
00:13:11:07 – 00:13:39:18
Isaac Weinberger
So a guy like Aaron and me are similar. We’re both in the game. We try to be honest, we do deals. I do costs like he buys apartment buildings. There’s a very, very big difference. Aaron’s better looking than me. But besides for that, Aaron is a real estate professional. Isaac is not a real estate professional, which means if I would go ahead, invest in Aaron’s deals where I would buy my own single family multifamily property, I would not be able to use that depreciation.
00:13:39:18 – 00:13:59:02
Isaac Weinberger
But those depreciation benefits against my regular W-2 income. Aaron can buy an apartment building, get a nice write off, and use it against his regular income, whether that’s acquisition fees, whether that’s it just just income, the cash flow that he gets from the property where even if he has a side hustle. So let’s say two hours a night, Aaron’s doing stuff on Amazon, right?
00:13:59:04 – 00:14:18:16
Isaac Weinberger
He can use his real estate professional status, which is a golden ticket technically, and use that to offset his Amazon or whatever income he may have. I don’t have that. So and the reason why I don’t have that is because I’m a W-2 guy, and even though I’m doing cost, it’s not considered a real estate activities. I’m going dealing in real estate.
00:14:18:18 – 00:14:41:03
Isaac Weinberger
What’s considered a real estate activity is, is buying real estate, managing real estate, construction, construction services. That gives you the status rep status, rep’s real estate professional status. Which makes a huge difference because I can syndicate a deal where you can syndicate a deal. And what happens is you buy a deal for 10 million bucks, and I get you $2 million in appreciation year one.
00:14:41:05 – 00:15:00:00
Isaac Weinberger
Okay, you have two investors on the deal. One guy is a real estate professional. One guys, one guy’s not a real estate professional guy. That’s a real estate professional. Invested X amount of dollars. He’s gonna get X amount of dollars in depreciation. You can use that against any income. The guy’s not a real estate professional. Let’s say the doctor won’t be able to use it against his W-2 his doctors income.
00:15:00:06 – 00:15:22:01
Isaac Weinberger
So while the deal still might make sense and it’s worth it to invest, of course, because you got cash flow IRR, you’re good to go. But, that extra credit, you will be able to utilize. So how can I help you utilize that? So what makes somebody a real estate professionals is, is these activities that I told you, if you do them on a daily basis, most of your day, you’ll be considered a real estate professional.
00:15:22:01 – 00:15:42:18
Isaac Weinberger
There’s really two. There’s really there’s really two, two ways to do it, not two ways. There’s two steps in order to gain that, to gain that status number one, 750 hours a year or more in real estate. Number two, that you’re spending more time in real estate than any other related activity. So if you’re a doctor and you’re spending 900 hours a year, you probably spend much more.
00:15:42:18 – 00:15:58:21
Isaac Weinberger
You’re spending 3000 hours a year, being a doctor, and you’re spending 750 hours a year doing real estate. It’s not going to help you if you’re spending more time, but being a doctor than than doing real estate. So not only do you have to do 750 hours plus, you got to make sure you’re not doing anything else more than that.
00:15:58:21 – 00:16:26:17
Isaac Weinberger
That’s why some people in Alviso, obviously you need a I would say you need to ask your local Orthodox CPA, but have you got to speak to your CPA? But maybe you can make your spouse into a real estate professional. Let’s say your spouse is not working and you put their name on the investments, whether you’re buying something and managing it yourself or whether you’re investing in somebody else’s deal, you can track those hours that you’re looking at and analyzing all these deals and investing and whatever, whatever, whatever else, it may be that you’re doing real estate related.
00:16:26:19 – 00:16:45:03
Isaac Weinberger
If you can make your spouse file jointly and use your spouse, your, your spouse’s real estate professional status to offset your doctor’s income, that’s a smart way to do it. If it’s possible. There are ways to do it in a legal way. But on top of that, this is something that’s going to be more relevant for the listeners over here today is that let’s say you cannot make your spouse as a real estate professional.
00:16:45:04 – 00:16:59:13
Isaac Weinberger
You’re not quitting your job as a doctor because you’re making a handsome income, right? So what are you going to do? You can use it to offset passive income. So if you invested in ten of Allen’s deals, plus you invested in other people’s bills and you have a lot of passive income, you have some stock market proceeds. Maybe you sold something.
00:16:59:13 – 00:17:19:08
Isaac Weinberger
You had a capital gain, which a lot of CPAs consider. Consider passive. There’s a big argument in the world if capital gains are considered passive or active, even if you’re even if you don’t have rep status. I keep saying ref status is real estate professionals, so even if you don’t have wraps, you always can use depreciation to offset regular passive income.
00:17:19:10 – 00:17:37:11
Isaac Weinberger
So some people are very smart. And what they’ll do is they have, they have a business and they’ll make their spouse into a passive partner in the business. So now boom, I’m making 500 a year. My wife is making 215 passive income. I can use depreciation to offset that. So I love having these conversations with people. Have it all the time.
00:17:37:13 – 00:17:57:03
Isaac Weinberger
I’m not saying it’s easy as pie, but there are ways to maneuver. If we’re, savvy enough, to get it done. Definitely have the conversation with. Just keep in mind, even if you don’t have a conversation, you’re making X amount of dollars in passive income. You can always use those benefits. Now, for the syndicators that are listening, sometimes it actually works to the benefit of the syndicator.
00:17:57:05 – 00:18:23:16
Isaac Weinberger
If one of the investors or 2 or 3 don’t can’t use those benefits because then it’s considered a suspended loss for them, you could actually somehow channel those depreciation benefits infrastructure to the O.R. a certain way with your attorney and your CPA, you can actually go ahead and move those depreciation benefits over to somebody else. And now you’re doubling his depreciation benefits because we’re excited to come in on the deal because he’s getting so much more benefit.
00:18:23:16 – 00:18:41:00
Isaac Weinberger
So again just a review. What’s really happening is is that it’s never going to it’s never going to be a problem for you. Even if you can’t benefit. You don’t have enough passive income. You don’t have, real estate professional status. It’s not going to be a problem. You just it’s that extra credit that you just can’t access.
00:18:41:02 – 00:19:07:00
Isaac Weinberger
But again, have that conversation and you can always offset passive income. But a guy, something I’ll just end with by saying, if you are a real estate professional, there’s no excuse for you to be paying a high tax bill to the federal, to the federal government. You should do everything you can by investing in real estate, buying your own stuff, whatever it may be, whatever talks to you, you should go ahead and make sure that you’re bringing down your bottom line, because we all spend so much time making money.
00:19:07:02 – 00:19:28:17
Isaac Weinberger
How much time are we spending saving our money now? I mean, if you’re going to make a million bucks a year, you’re going to give 30% or more to the IRS. There’s no excuse for that. Go invest with people because that money is invested, might not have it in your bank account, but that money is invested. And now you got major depreciation benefits that, will totally offset at least some or hopefully most of your tax liability.
00:19:28:19 – 00:19:56:07
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00:19:56:09 – 00:20:28:11
Aaron Fragnito
Yeah, yeah. Know that the tax system is incredible for real estate owners. And you know, we we have a number of exits that we realized last year. And this year we sell some buildings that we’ve stabilized over the last 4 or 5 years. And, some investors have done very well on those. And now we’ve offered them new investment opportunities, which we do cost segregation studies on, so we can frontload that tax depreciation on the new acquisition and use that to write off the gains on the previous exit, as long as it’s done in the same calendar year there.
00:20:28:17 – 00:20:49:12
Aaron Fragnito
And that’s a great way for these, you know, passive investors that are going from a a passive exit to a passive investment with us to write off those gains and also the cash flow, you know, to avoid any, taxable, tax burden on the cash flow they’re earning on these, passive investments. You can use those, passive tax write offs to write off the cash flow.
00:20:49:14 – 00:21:11:10
Aaron Fragnito
But what you’re explaining, Isaac, is incredibly, sophisticated and and smart, and I think, you know, could be a whole, like, masterclass in itself of, like, how, you know, married couples can use, you know, I mean, obviously, you have a good relationship with your spouse, so, you know, that probably should be chapter one of this, lesson.
00:21:11:10 – 00:21:37:15
Aaron Fragnito
Make sure your marriage isn’t on the rocks. That could be a mess. But how could you use, you know, the relationship of maybe, one spouse that works very part time or is, a homemaker and able to then qualify as a real estate professional in one way or another? I’ve seen people buy, a beach house and do Airbnb, and now they get their 750 hours that way, you know, and, and so on.
00:21:37:15 – 00:21:52:24
Aaron Fragnito
And now they get that, you know, they can they can write off active gains, you know, because they’re managing the Airbnb and so on. And you get a beach house. It’s kind of fun. So there’s lots of different strategies there. In fact, I know, I know Ray that does that. And he’s, like, crushing it completely.
00:21:52:24 – 00:22:15:12
Aaron Fragnito
Writing off his, active gains with this area business by owning a beach house and managing it on Airbnb. And, he’s able to then write off his gains. Is active gains from his business, of of managing other people’s money as an Ria. So obviously, you want to talk to a wealth, really a CPA? You know, professional who can guide you in this process.
00:22:15:18 – 00:22:36:13
Aaron Fragnito
I’m sure Isaac and Guy, can put you in touch with one of those as well. Madison Specs does all types of, services. There, accounting costs and so on. So that’s a that’s really interesting. Okay. So then, that was a nice deep dive into different ways to utilize passive tax write offs and active tax write offs.
00:22:36:13 – 00:22:58:20
Aaron Fragnito
And, you know, I actually did a whole masterclass on the lazy 1031, which is essentially when you sell a property, you have a tax burden, then you buy another property that same calendar year, and you do a cost seg on that new acquisition, and you use those, accelerated, tax depreciation to write off your gains in the last sale, which we call lazy 1031.
00:22:58:20 – 00:23:23:10
Aaron Fragnito
That’s a special buzzword for it that millennials are using. So you can you know, that’s a good way to get some hits there on your LinkedIn profile. And but let’s talk about the, you know, the changes in the law here because bonus depreciation, you used to be able to take 100% bonus depreciation, right? She, she can get a lot more of a tax write off through a cost segregation study.
00:23:23:12 – 00:23:45:15
Aaron Fragnito
Then the last administration came into office and for some reason, decided to lower that and kind of phase it out than it was like 80% one year. Then it went down to 60%. Now I think it’s 40% bonus depreciation. So essentially you’re allowed to take less and less, bonus depreciation from this cost segregation study. So the bottom line is you get less of a tax write off.
00:23:45:17 – 00:24:07:23
Aaron Fragnito
Now the new administration is a little more business friendly. And of course, Donald Trump is a real estate investor and understands the value of this cost segregation law. And bonus depreciation. So I what’s the rumblings on the street? Are they trying to bring back 100% bonus depreciation? Because if that’s the case, oh, Isaac, you’re going to be crushing it.
00:24:07:23 – 00:24:22:02
Aaron Fragnito
Everyone’s going to run out and all of their costs sag. As a me first in line, of course, because that’s going to be amazing to get 100% bonus depreciation back. What what’s, what are we hearing is going to be the, the possible change in law there.
00:24:22:04 – 00:24:42:02
Isaac Weinberger
I love this conversation. So I’m going to backtrack for a minute. So but when bonus depreciation started phasing out, a few people approached me like, Isaac, you’re looking for a job. Maybe you can be a gas station attendant. And, if you need any help, call me. And I sat down as follows. I said prior to September of 2017.
00:24:42:04 – 00:25:05:17
Isaac Weinberger
Okay. Bonus depreciation was only introduced in September of 2017. Prior to then, cost SEG nationwide was still a multi-year billion dollar industry. The reason being is, is that even if you completely wipe away bonus depreciation, regular costs, which lets you accelerate certain components of the five and 15 year bucket, which lets you take them over a period of 5 or 15 years.
00:25:05:19 – 00:25:22:24
Isaac Weinberger
Bonus really lets you take elect to take that most of that in year one, but even without that, it’s definitely still worth it to do a cost like in any building this purchased, I would say for 3 or 4 million and above. Definitely worth it to do a car seg, because you might not be able to get in my example, the ten bucks a year, you might not be able to get $30 year one.
00:25:22:24 – 00:25:39:11
Isaac Weinberger
We might be able to get over the first five seven years of ownership of the property, might be able to get out of that 100 bucks, maybe $50. Sorry. That’s that’s over five years. So let’s say you get 70, right? You’re still going to get a nice amount of it. You won’t be able to get as much, but still a nice amount.
00:25:39:13 – 00:26:01:03
Isaac Weinberger
So just keep that in mind. So even if somehow a bonus depreciation next administration phases out costs through regular accelerated depreciation and can still get you a substantial amount of benefits. That being said, Aaron, as a as a great point, and there’s been a lot of rumblings, a lot of talk in the street, what’s going on in Congress.
00:26:01:09 – 00:26:24:10
Isaac Weinberger
So just to give you just to give you a summary and just a rewind and let you know really what happens, a 2017 bonus was introduced. So starting from September 2017, 2018, 2019, 2020, 2021, 22 had 100% bonus. That means anything that we find in the property as components that we can accelerate. You can take it all on your one, okay.
00:26:24:12 – 00:26:45:20
Isaac Weinberger
Starting January 1st of 2023, bonus went down from 100 to 80. Okay. That means if we find 20% of the property’s purchase price and that of land is components that we can accelerate, you can only take 80% of that 20% year one. What happens that extra usually gets you get it over year two, three, four and five. So you’re still going to get in the earlier years, but not everything.
00:26:45:20 – 00:27:10:09
Isaac Weinberger
Year one 2024 that went down to 60%. We find again same example if I 20% of your property’s purchase price, net of land as I like to, I don’t think this is a word, but like accelerate of all components, I always use that. You can go ahead and take 60% of that year one again, that additional 40 that left over 40 gonna come to you in years to 3.5.
00:27:10:11 – 00:27:33:04
Isaac Weinberger
Now 2025 went down to 40%. So we’re talking about the difference between 2022 and 2025 is close to half. Sorry. Even less than half. That means you buy a $10 million property in 2022 by 1 to 3 Main Street for 10 million bucks, and we get you 2 million. In 2024, you’re looking at 800,000. 850 you’re looking at less than half.
00:27:33:06 – 00:27:56:12
Isaac Weinberger
So your pitch to your investors is not as strong. You’re pinched yourself in terms of what entices you to buy because you want depreciation benefits as well. It’s just not as not as enticing. There’s a lot of talk on the street and then they really try to introduce this last year. To bring back 100% bonus. And it was part of the big tax tax package.
00:27:56:12 – 00:28:14:14
Isaac Weinberger
And it didn’t pass. I don’t really think it didn’t pass. I think it just got stalled. They got they got busy with more important things. And now Trump is making a big push for this. And obviously because because the House of the Senate are both red. The president is red. So therefore, it looks like it will happen.
00:28:14:16 – 00:28:36:10
Isaac Weinberger
They’re very business friendly. They want these tax cuts because, again, it fuels the economy. So 100% bonus is on the table to come back. It looks like it really will happen. I place my bets on it that it will. And like Aaron said it really is a game changer because guess cost seg without bonus or even half of bonus can be exciting.
00:28:36:12 – 00:28:54:03
Isaac Weinberger
But how much more exciting is it to double your money right now? Take 20 bucks over ten bucks. I needed a week so I could go ahead and really pitch to my investors. You’re going to get dollar for dollar. You invest 100 grand and I’m going to give you 100 grand of benefits versus giving you 50 grand and benefits $0.50 on the dollar.
00:28:54:05 – 00:29:19:09
Isaac Weinberger
That’s that’s just definitely more exciting and enticing for somebody to invest in real estate versus the stock market, because you go out and you take away the tax benefits. Real estate might be more lucrative, but depreciation is a big swing. Big is a big talking point between stock market and real estate. So, definitely, a greater talking point and even for small, not even I would say specifically for small investors, it makes a big it really makes it.
00:29:19:11 – 00:29:41:06
Isaac Weinberger
It’s really a deal breaker. You buy a $500,000 Airbnb beach house, like Aaron was talking about. And you can get 150 grand versus 75 grand. You’re one. That’s a make it a break if you’re gonna do a cost. So for me, that’s it’s definitely beneficial for you is very beneficial. But again, even for regular syndicators and their investors, 100% bonus can can be a real, real game changer.
00:29:41:08 – 00:30:08:03
Isaac Weinberger
Let’s pray. Fingers crossed that this happens. I think it will happen. But again, just as a reminder, even if it doesn’t cost, SAG is a very, very valuable asset because you will get that 100% bonus over the course of the first 5 to 7 eight years. So you’re still talking about a big, big chunk. Obviously, I would elect every single day of the week to take a 100% bonus versus taking excuse me versus taking 40 and the rest over time.
00:30:08:05 – 00:30:09:23
Isaac Weinberger
Yeah.
00:30:10:00 – 00:30:36:07
Aaron Fragnito
Yeah. Absolutely. And it’ll just really fuel the economy when we buy an apartment building we create so many jobs. You know we’re hiring contractors. We’re hiring. Yeah. Cost seg lawyers, brokers title companies lenders. Oh my gosh they and materials the list goes on and on. Due diligence companies, environmental companies, you know, inspections. It’s just, it’s crazy.
00:30:36:07 – 00:31:02:24
Aaron Fragnito
Leasing agents, and banking and everything. I can’t tell you the amount of companies that we work with, you know, marketing companies to raise the capital. SEC attorneys, eviction attorneys, the whole thing. Man. It goes on and on and on. And, renovating units, leasing them up for, you know, higher market value, increases, you know, different, tax revenue to the, you know, the property tax.
00:31:02:24 – 00:31:26:17
Aaron Fragnito
Oh my God, you know, oh my gosh. It’s like so many benefits when we turn real estate, when we buy real estate, when we improve real estate. And that incentive to essentially double the amount of bonus depreciation we can take now, even more than double it is phenomenal, you know, that’ll encourage us to buy more real estate. It’ll encourage more people to invest in real estate because the benefits are just that much greater.
00:31:26:19 – 00:31:47:22
Aaron Fragnito
And, and it’ll create an exponential increase in economic activity and jobs and so on, and, property values. So really hoping for that as well. And I think it’s going to happen here. So I’m excited for that. So, Isaac, incredible podcast here. We’ve covered a lot of information about the different types of, tax write offs.
00:31:47:22 – 00:32:10:02
Aaron Fragnito
One can take, you know, the passive versus active different strategies to become a real estate professional and utilize, you know, tax strategies to, really take full advantage of that bonus depreciation and the tax benefits, real estate offers. And then also, what we might see for a bonus depreciation, bonus depreciation coming back and in swing here at 100%.
00:32:10:02 – 00:32:25:10
Aaron Fragnito
Which would boy you’d be a busy man. You need to hire a few more, people under you. You’d be working late nights. You’d have to tell your wife. Sorry, honey, I’m bringing home the bacon. Going to be on the clock tonight. Leave dinner out for me. She’s not gonna buy.
00:32:25:10 – 00:32:29:08
Isaac Weinberger
That with with some lowered interest rates, God willing. Bull, we got you got.
00:32:29:09 – 00:32:49:18
Aaron Fragnito
My gosh. I mean, you are going to be sitting pretty. We’re going to be doing well for our, our clients and, and so on. So, you know, but Isaac, I really do appreciate, you know, you’re sponsoring our event here on June 25th in, Somerset, new Jersey. By the way, anyone listening if. Oh, this might be out after that, but check out our real estate network, that new Jersey real estate network for more events.
00:32:49:20 – 00:32:56:08
Aaron Fragnito
But I appreciate all your support through and through. How can people reach out to you and, learn more about your services?
00:32:56:10 – 00:33:01:16
Isaac Weinberger
My wife tells me that she wants to get Ahold of me. She messages, messages me on LinkedIn. Okay, there you go.
00:33:01:20 – 00:33:02:00
Aaron Fragnito
There you.
00:33:02:00 – 00:33:21:14
Isaac Weinberger
Go. So I’m a big LinkedIn guy. Connect with me on LinkedIn. But obviously, Aaron, you can put in the notes, my phone number and my email address. I’d love to talk to each and every single one of you about your situation, whether you’re a $200,000 Airbnb guy or whether you’re, you’re focusing on $70 million acquisitions of Class-A multifamily.
00:33:21:20 – 00:33:27:07
Isaac Weinberger
So, I double them all. And, I’m excited to chat with you, and I hope you enjoyed this podcast as well.
00:33:27:09 – 00:33:47:05
Aaron Fragnito
Thank you. Isaac. Yes, we will put your, website there. We’ll put your phone number, your email in, the show notes. Everyone can reach out to Isaac directly and find him on, LinkedIn. He’s, he’s a fun guy to follow there. Isaac Weinberger, a nice Jewish boy, you know, really, really good gentlemen here. So, now you’re a good man, Isaac.
00:33:47:05 – 00:34:01:14
Aaron Fragnito
I always appreciate doing business. Do you do you run an honest business over there? And you certainly know, your taxes. I gotta say, I’ve learned a lot from this, podcast. I love that when I do a podcast and I learn things, do my own podcast, it’s. I feel like I’m double dipping here. It’s great.
00:34:01:16 – 00:34:05:08
Isaac Weinberger
I appreciate it. I appreciate all the other other love. Really do.
00:34:05:08 – 00:34:24:17
Aaron Fragnito
With me. Yes. And to our listeners here, if you’re finding value in these episodes, all I ask is that you share them with a friend, colleague that would also find value in, these episodes, the Passive Cash Flow podcast and like and subscribe on, the platform that you’re listening on. Check us out on YouTube, People’s Capital Group.
00:34:24:17 – 00:34:42:09
Aaron Fragnito
And of course, I’m the co-founder of People’s Capital Group here. My name is Aaron Frank Nieto. We help people build and preserve their wealth through new Jersey apartment buildings. So a lot of our investors are local to new Jersey, but not all of them. We’re buying a large 78 unit in Hackensack, new Jersey right now. If you want to learn more about that, contact us.
00:34:42:09 – 00:35:06:22
Aaron Fragnito
You can learn more. People’s capital group.com. And we come out with a new episode of the Passive Cash Flow podcast every two weeks. So keep us subscribe. You keep listening and reach out to Isaac Weinberger here. He’s going to be able to save you money on your taxes legally. Avoid paying the tax man. So unless you really love paying taxes, you should contact Isaac today and he can help you out.
00:35:06:24 – 00:35:08:13
Aaron Fragnito
How’s I sound, my friend?
00:35:08:15 – 00:35:10:13
Isaac Weinberger
I love it, I love it.
00:35:10:15 – 00:42:38:14
Aaron Fragnito
Absolutely. All right, thank you. Bye, listeners. Enjoy your day.
00:42:38:16 – 00:43:01:15
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At Peoples Capital Group, we help you invest in real estate. Build your wealth by owning professionally managed apartment buildings in the northern new Jersey market. We want to show you how owning real estate is attainable. Even for the busy professionals that don’t have the time or experience investing in real estate. Now, we only work with select people who are serious about building wealth.
00:43:01:19 – 00:44:31:12
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00:44:31:14 – 00:44:54:13
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At People’s Capital Group, we help you invest in real estate. Build your wealth by owning professionally managed apartment buildings in the northern new Jersey market. We want to show you how owning real estate is attainable. Even for the busy professionals that don’t have the time or experience investing in real estate. Now, we only work with select people who are serious about building wealth.
00:44:54:17 – 00:44:58:17
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So find out if you qualify at People’s Capital group.com.
