Teaching Tax Flow: The Podcast

In this episode, Chris Picciurro, a tax planning expert and real estate investing enthusiast, draws the strategic connections between long-term real estate investments and tax planning. He introduces listeners to the dynamic interplay between investment and taxation, in which different elements overlap to create a comprehensive understanding of income, appreciation, and inheritance.

Diving deeper, Chris unveils his top 3 reasons to invest in real estate from a tax perspective. He explains how tax-free income can be generated through depreciation deductions, often leading to reported losses on tax returns despite positive cash flow.

This episode extensively discusses concepts such as tax-deferred capital appreciation, highlighting real estate's potential to grow in value without incurring taxes until the property is sold, and the powerful 1031 exchange strategy, which allows investors to defer taxes indefinitely. The discussion also touches on the step-up in basis, a benefit where heirs inherit property at its current market value, potentially leading to significant tax savings.

⸻

STUDIO SPONSOR
Strategic Associates
👉 www.teachingtaxflow.com/studio

EPISODE SPONSOR
Wealth Builders Mortgage Group
Your trusted mortgage partner for investors and entrepreneurs.
👉 https://www.wealthbuildersmortgagegroup.com

⸻

👉 Spotify https://bit.ly/3KdmtJL
👉 Apple Podcasts https://apple.co/3ZkyEtX
👉 Amazon https://amzn.to/4qmdqa5
👉 iHeart https://bit.ly/iheart-TTF
  • (00:44) - Chris' Top Three Reasons for Real Estate Investing
  • (01:20) - Long-Term Benefits of Real Estate Investing
  • (02:19) - Tax-Free Income in Real Estate
  • (04:09) - Planning and Strategy for Real Estate Investment
  • (05:14) - Tax-Deferred Capital Appreciation
  • (07:32) - Step-Up in Basis for Inherited Property
  • (11:48) - Real Estate vs. Other Asset Classes
  • (14:33) - Conclusion and Wrap-Up

Creators and Guests

Host
Chris Picciurro
Founder, Teaching Tax Flow
Host
John Tripolsky
VP of Marketing, Teaching Tax Flow

What is Teaching Tax Flow: The Podcast?

Welcome to “Teaching Tax Flow: The Podcast”, the show that’s all about demystifying taxes and helping you keep more of your hard-earned income in your pocket.

Hosted by tax experts from the Teaching Tax Flow team, this unfiltered (but clean) podcast is designed to empower you with the knowledge and tools you need to confidently navigate the world of taxes. We’ll cover everything from understanding tax laws and regulations to maximizing deductions and credits.

In each episode, we’ll break down a specific tax-related topic in a clear and accessible way, providing practical tips and strategies you can use to optimize your tax situation. We’ll also answer listener questions, share the mic with amazing guests, and share real-world examples to help illustrate key concepts.

Whether you’re a freelancer, small business owner, real estate investor, or just looking to understand your taxes better, this podcast is for you. So tune in, take notes, and start building your confidence in taxes today.

Produced and hosted by Teaching Tax Flow.
www.TeachingTaxFlow.com

John Tripolsky:

Everybody, welcome back to the Teaching Task Force Podcast here at the Strategic Associates studio. That's right. Check out these guys here in the show notes. We'd be happy to introduce you to them. Great group of guys over there.

John Tripolsky:

So why we're here today? We are going to connect some dots here. As you can see here, we're going to say this is one dot and this is another dot. We are going to take that long term real estate investing, which I'm sure a lot of you have heard of, and we're going to connect it with tax planning and strategy. And by putting those two together, it's kinda like a three quarter or two thirds of a Venn diagram.

John Tripolsky:

Anybody remembers those things back in school where the colors change and it all makes sense? We're gonna dive into it. We're gonna make sense of that here. Chris, I believe that you have your top three reasons for this. Correct?

Chris Picciurro, CPA:

I do. There are a lot of reasons to invest in real estate. I've done which has been one of my passions for a long time and the focus of our private CPA firm, working with real estate investors. However, I broke it down to my top three, but this is the key, term advantages. Remember, one of the three laws of teaching tax flow is that cash flow and tax flow are different, and what we what that means is that ties into our goal of legally and ethically reducing the tax you pay in your lifetime, not just today.

Chris Picciurro, CPA:

So when I say long term real like, if you're gonna invest in some real estate, what are the long term benefits? Long term being defined as, let's say, over five years, if you own something for more than five years. And there are a lot of them, right? One of the other laws that teach in tax flow, that tax law that rather the tax agencies are your involuntary business partner. That means that tax laws are written to encourage or discourage certain behavior.

Chris Picciurro, CPA:

So let's look at some of the things that the behavior of real estate investing will provide you some benefits. So, yeah, let's jump in because I've categorized them in these three as to the first one, let's talk about income. So let's assume you're buying real estate that's rented out. It could be any asset class. Right?

Chris Picciurro, CPA:

It could be a rental property. It could be a self storage unit. It could be a, Geez, a commercial bill, Office. Right. And it could be as direct ownership, meaning you own it, or it could be as as part of a a syndication.

Chris Picciurro, CPA:

Where you are a minority owner and you own a portion of it, but the benefits could still be the same. And one of the benefits is tax free income. You might say, really? That seems weird because, well, I bought a rental property and my mortgage payment's $400 a month, but I can write it out for $700 a month. I make $300 a month in cash.

Chris Picciurro, CPA:

Yeah, that's cash flow. But with tax flow, you get the depreciation deduction on real estate. So in general, many, I'd actually say most rental properties that we see on a tax turn for tax purposes show a loss because you're deducting the cost of the asset that you purchase over time, even though you're putting rental money in your pocket. And John, that might even happen like you, for instance, let's say you were to buy a home and this might have happened to you in your real life. Right?

Chris Picciurro, CPA:

You you lived in it for a while, and you said, you know what? I'm gonna rent it out. Your mortgage payment might be x, and you're renting it out for more. You might be putting some money in your pocket, but for tax purposes, you're really not paying tax on that income. So tax free income is nine is one of my three.

John Tripolsky:

And I love that you break that down, right, because I know we mentioned it a 100 times umpteen number of times in in recent episodes. Cash flow does not equal tax flow. Two totally different things. And when people understand that, right, I think it know it triggers something in them, which is what we're all about. Right?

John Tripolsky:

Tax planning and strategy. Because it's not like you're going through a checkout line at a grocery store and be like, yep, I'm gonna buy this property today. Boom. And I'm gonna run it out. If you know that's your goal, you're planning for this, right?

John Tripolsky:

And I'm sure that we don't have to go into any of these details because it's a whole nother episode on every one of these. But if somebody has that as a goal form, right? They they're kind of planning to it and planning against it, right, like you might look at somebody I don't know if this ever come up where you're like, know what, don't even worry about this, you need to look at something completely different. I know your heart's telling you to go this way, but your bank account is not, or, you know, connecting the dots and that it all comes into the planning side. Right?

John Tripolsky:

And that relationship with a tax professional, not just shooting from the hip and, oh, I bought a cottage here that I'm gonna rent out. But Right. You know? Yep.

Chris Picciurro, CPA:

Right. And you have that option. That direct ownership like a cottage or a private placement where, okay, I'm gonna throw my money into the ring and I'm gonna be a part owner in something. So, yeah, tax free income is a huge advantage of rental buying real estate, long term long term advantage of buying real estate. The second of two of three rather is tax deferred capital appreciation.

Chris Picciurro, CPA:

What does that mean? Well, if I buy a property, let's say you bought a piece of land for for $50,000 and you sit on the land and the land becomes worth $200,000 you're not taxed on the fair market value of the land. Your land may have went up in value, so your assets have grown. But if you don't sell it and you just hold on to it, you're not paying any income tax on the value increase. And that's where real estate could be really nice because one, it could produce that tax free income, but you get tax deferred appreciation.

Chris Picciurro, CPA:

So tax deferred appreciation. Now here's the beautiful thing. I'm gonna tie this into real estate. Right? Or number two.

Chris Picciurro, CPA:

What happens on if you buy that piece of land, $50,000, and you held it for an investment, maybe even leased it out to someone, a farmer or who knows, right, and then now it's worth 200,000. You say, you know what? It's time to sell. I wanna buy a different investment. Guess what?

Chris Picciurro, CPA:

You could take that tax deferred income, meaning that tax deferred appreciation, and kick the can by doing something called a ten thirty one exchange, a like kind exchange. And it's really nice because on a like kind exchange, you don't have to buy another piece of vacant land. You could exchange investment land for an apartment building. You could exchange residential property for commercial property or an industrial property. So you've got a lot of options.

Chris Picciurro, CPA:

So not so the great thing, number two, is tax deferred appreciation, and that tax deferred appreciation could extend your entire life. You could never pay tax on that gain. You could start with a $100,000 rental property. Own that for ten years, sell it for 400,000, buy an investment beach condo, own that for ten years, that goes from $408,100, sell that and go buy a commercial building. And you own it, you know, and never pay tax on that appreciation in your entire life.

John Tripolsky:

And then if you plan a if you plan good. Right? You just keep kicking the can, and then when somebody inherits your assets, there's that step up in basis.

Chris Picciurro, CPA:

Right? Well, you just hit on number three of my

John Tripolsky:

Oh, did I really? I and by the way, buddy, I had no idea what in the world he was gonna talk about number three. So, hey. Hey. Your three actually flow very nice.

Ad Read:

This episode is sponsored by Wealth Builders Mortgage Group, powered by Movement Mortgage, one of the top mortgage teams in the nation and a powerhouse in the real estate investing world. With over $1,100,000,000 in closed mortgage volume and more than 3,000 investor deals under their belt. They don't just talk the talk, they walk it. Their team specializes in helping short term and long term rental investors scale smart with customized lending strategies. They offer all STR loan products, including second home, investment, non QM, bank statement, asset based, and HELOCs.

Ad Read:

They also offer all primary home loan products, too. Whether you're just starting out or expanding an existing portfolio, their unique path of 10 strategy is designed to help you move from a nine to five job to financial independence. If you're looking for a lending partner who truly understands the investor mindset, visit wealthbuildersmortgagegroup.com and start building your roadmap today.

John Tripolsky:

I would love to hear from people that are watching this. So listen. Let's let's use YouTube as an example. Anybody that's done a ten thirty one exchange like that, I would, for one, I would love to know kind of how you felt when you're like, did you kind of feel like you had the upper hand with the IRS when you did that? Like, just tell us something about it.

John Tripolsky:

I mean, you can even make up a story if you want to, which is when you said that liked kind exchange. So like, you know, similar property in in nonspecific terms. What a powerful tool. Like you mentioned, you buy it for 50, sell it for $2,200. Right?

John Tripolsky:

You have a 150 there that you're avoiding that capital gains tax, which that is a killer. But back to the planning side. Right? You can't do a $10.31 after the fact. You have to know you wanna do it before, you know, you're you're signing a signing a contract over.

Chris Picciurro, CPA:

Absolutely. You've got to use what's called a qualified intermediary. So think about someone that this we had a real client that started with a property that was like $100. They in over the forty years, they did three ten thirty one exchanges, acquired a $1,200,000 commercial building that was already leased out to a Dollar General type store, you know, for it

John Tripolsky:

was a I

Chris Picciurro, CPA:

mean, it was, like, $12,000 a month or something. So now the client is getting him $12,000 a month check. They get some, know, some deductions for real estate taxes, insurance, but basically mailbox money. Oh, I coulda had a bonus advantage. The rental income is is not subject to self employment tax.

Chris Picciurro, CPA:

You're not paying Social Security and Medicare on this, right? It's and that $900.00 of appreciation. So, had they sold properties from 100,000 to 1.2? So it's actually 1,100,000, right? That would have eaten up 200 to $300,000 of asset if they didn't do the $10.31 exchange.

Chris Picciurro, CPA:

So that kept so they started with $100,000 Think about this. In their pot, laid out the first property. That went up in value. They sold that, took all that money, rolled into the next one, into the next one, next one. So they're only $100,000 into this property that's paying them $12,000 a month.

Chris Picciurro, CPA:

Now it took time, patience, maybe some luck, maybe some knowledge. However, that's how and and the nice thing about the $10.31 exchange is you can you can sell one property and replace it with four properties. It's not necessarily a one for one. So that's number two. And then number three, like you mentioned, let's say you do the strategy.

Chris Picciurro, CPA:

One of the reasons this client was doing the strategy is they wanted their children, excuse me, to inherit the property at what's called a stepped up basis. So had that client sold their property for $1,200,000 a day before they passed away, they would have paid tax on that entire gain, right? That $1,100,000 of the gain. But if they just own the property until their children, they inherited or they passed away and their children inherit it, the children now own the property and for tax purposes, their cost basis is $1,200,000 So they get a deduction for that $1,200,000 minus land over the next x amount of years, or if they turn around and sell the property a month later for the 1,200,000, they don't pay tax on it at all. Right?

Chris Picciurro, CPA:

Because their basis and their sale price is the same. So tax free income, tax deferred capital appreciation, and then tax free capital gain upon inheritance. Those are my top three long term real estate tax advantages. Because if you did this with other asset classes, if I bought stock now there's a step up in basis of stock. But, John, if I bought General Motors stock and then I decided, you know what?

Chris Picciurro, CPA:

I only have for ten years, I sold it and had a big capital gain. I'd pay tax on it. Now you're giving a portion of that to your involuntary business partner, the IRS, the state of Michigan, the state of wherever the heck you live, and then took that money, whatever was left, which is probably 80% of it, go buy Apple stock and then ride that up and sell it. Every time you take that gain off the table, you're giving money to your partners. With real estate, you don't have to give money to your ever.

John Tripolsky:

You got it. And I love those three. And, Chris, I think I'll I'll wrap with this one is I think you probably just increased the viewership of crime television or that first 48 by 5% because of this podcast. Now people are gonna go watch all these and be like, I know why they did it. They wanted the step up in basis in the life insurance policy.

John Tripolsky:

But you know?

Chris Picciurro, CPA:

It's funny. I'm giving my oh, I know we're we're gonna finish with this.

John Tripolsky:

You're good.

Chris Picciurro, CPA:

It's just in my how my brain's wired whenever we drive past something that looks odd, and I'm thinking about the tax ramifications. So my wife's parents live in Texas, in Galveston, Texas, and it got ravaged by by storms. It often gets ravaged by storms. Great place, though. Fun to visit.

Chris Picciurro, CPA:

And there'll be homes that have been probably on that island for thirty years that just get completely wiped out. Right? And they probably it's like, why aren't they rebuilding the well, guess what? If they they're probably taking the insurance money and letting the kids get a step up in basis when they inherit the property because if they go sell the property, they're gonna have a capital gain.

John Tripolsky:

Yep. Planning. And Planning. Mhmm. Absolutely.

John Tripolsky:

Alright, everybody. Well, we'll we'll wrap up with that one here. Again, those are three of many, many reasons and that long term real estate investing is not everything. Right? It's one cog and that planning and strategy wheel.

John Tripolsky:

So any questions, drop them in the comments there here on YouTube, as well as I mentioned that a little earlier. Let us know about maybe your experiences with some of the stuff. We'd love to hear any questions. Let us know. Chris personally will make him answer those ones.

John Tripolsky:

So check it out. We'll drop some resource links as well here in the show notes. Don't be lazy. Click on those, subscribe to the channel, and we'll see everybody back here again next week on the Teaching Tax Flow Podcast. Have a great week, everybody.

John Tripolsky:

The

Disclosure:

information in this podcast is educational and general in nature. It reflects the opinions of teaching tax flow and does not take into consideration the viewer's personal circumstances. It is not intended to be a substitute for individualized financial, legal, or tax advice. Consult the appropriate qualified professional prior to making any decisions. Securities are offered and supervised through Cabin Securities Inc member, FINRA SIPC.

Disclosure:

Investment advisory services are offered and supervised through Cabin Advisors LLC, an SEC registered investment advisor. Chris Picciurro is a registered representative of Cabin Securities and an investment advisor representative with Cabin Advisors LLC, teaching Tax Flow as an independent entity and is not affiliated with Cabin Securities or Cabin Advisors.