Can Real Estate Investors Legally Pay Zero Taxes? CPA Explains the Strategy

Michael Uadiale,CPA (00:00)
That’s simple.

Be constantly an investor.

Because as long as you are investing, this tax code itself rewards you for investing, especially in real estate. If you are a constant investor, you will never be lacking for tax deductions to help you get to better place.

Simple.

Scott Bursey (01:54)
Welcome to the Real Estate Pros Podcast. I’m your host Scott Bursey. And today we’re talking about how to save money on taxes with our guest, Michael Uadiale Michael is an expert tax specialist for real estate professionals. Michael, welcome to the show.

Michael Uadiale,CPA (02:09)
Thank you, Scott. My pleasure to be here.

Scott Bursey (02:12)
It’s our honor to have you here, Michael. For our listeners who may not be familiar with your journey, tell us how your career began and where you’re sitting today.

Michael Uadiale,CPA (02:21)
That’s an interesting one. I’ll speak for the sake of time in terms of how I transitioned to a practice in CPA care. ⁓ a very long story of how I choose to become an accountant. But the one thing I found out very quickly when I started my work life in corporate America was the fact that too many CPAs out there were just into compliance. I worked in

Silicon Valley made some very significant W-2 incomes and even as a CPA knowing that I was going to make all that kind of money I was looking for a CPA that could help me plan my taxes, okay? So as to make sure I was not paying more than I needed to pay. Well, long story short even when I found what I thought was a CPA for that purpose paid him what he asked for.

there was no tax planning done. At the end of the year, when it was time to find my taxes, I ended up owing some very significant tax bill. That really got me thinking. So after about 10 years in corporate America, I decided if I was going to go into practice, I wanted business owners and high networked entrepreneurs to truly have a different experience when it comes to how their taxes are paid and planned for.

That’s how I got into being a practicing CPA.

Scott Bursey (03:47)
That’s awesome. Michael, let’s start with what everyone wants to know. What is the single biggest, most valuable deduction that you see real estate investors overlooking on a regular basis?

Michael Uadiale,CPA (04:00)
I wouldn’t know if the answer is overlooking. I think it may be more of a lack of proper education to truly maximize that deduction. And the reason why I say that is because many people who go into real estate businesses, they get it. They hear about the fact that real estate has very significant tax benefits. Okay.

But too many times, many of them go into real estate as a way of getting their financial freedom without truly mastering understanding and knowing how to truly implement how they get the tax benefits inside of real estate as an industry. And that’s the single thing about being called a real estate professional.

Again, when we’re talking about real estate professional, we’re not talking about just buying and selling as a real estate agent. We’re talking of the special status that internal revenue service could allows you if you truly qualify as a real estate professional. So I think that’s the biggest miss because it’s such a huge thing. does magic to your cash flow. It does magic to what your taxes is. If you truly master.

how to become a real estate professional and know that you are doing it without any fear of an audit.

Scott Bursey (06:12)
That’s huge. Now for someone who’s just getting started, maybe they just bought their first property. What’s the first tax entity they could consider setting up to protect themselves?

Michael Uadiale,CPA (06:26)
Who did you see? There’s no one size fits all. Okay. And that’s something everybody really need to understand. Again, this is exactly why we constantly are saying to anybody that cares to listen, don’t do what you just saw your friend or your uncle or your sister or somebody else that is close to you do. Even if that person is your mentor. When it comes to taxes, everybody’s situation is gonna be different. Now, typically in a high level concept,

When you are going into real estate businesses, yes, you should begin to consider warehousing your portfolio of real estate if you are going into long term or short term, whatever, ⁓ inside an LLC. That’s fundamentally something you may not go wrong with. How that LLC files taxes could be different, subject to your situation.

because there is a difference between what we call a legal entity. A legal entity is how are you organized in this state of formation. A tax entity is how you as the owner of the entity tell the Internal Revenue Service you will like to file taxes. They could be two different things. So you can have an LSE and I can have an LSE. I can choose to tell the IRS that well,

I want my LLC to fight taxes as a partnership between me and my wife. You could be telling the IRS that I want my LLC, both of us have LLCs that have real estate. You could choose to say, I have an LLC for legal protection, but you know what? I want it to fight taxes as a schedule A in my personal tax return. So all of this is going to depend on who are you talking to?

What is the person’s situation before you give that kind of specific advice?

Scott Bursey (08:17)
Thank you for being very clear on that. Many of our listeners use general CPAs. Why do you find that a general CPA often misses some of the truly significant tax savings that are available? Specifically to real estate investors, Michael.

Michael Uadiale,CPA (08:19)
Thank you.

⁓ So I always say this to listeners. You wouldn’t want a general practitioner doing a brain surgery on you if there is something wrong. Our profession is a challenged one. It’s a tough thing to be recognized to pass the test and become licensed as a CPA. Well, I really, I am advocating

just like I’m seeing lawyers do to most of my professional colleagues, they should try to become specialists in some very specific area because the tax code in itself is very broad. ⁓ I think many of my colleagues make the mistake of thinking, yeah, because they are CPAs, they can save everybody. Yeah, you may save the people, but they end up leaving a lot of money on the table, right? The reason why many CPAs who are generalists

miss a lot of those things is they don’t go deep enough. There’s a reason why when you go see a doctor, it’s a GP when he or she looks at you and then if she thinks this is beyond me, that doctor is not ashamed to send you to a specialist. I think CPAs, we should be behaving or practicing in that same way. Okay.

There are really lots of ways to guide the real estate professional so that they can truly maximize their wealth and get to their financial freedom on time. But if you as a CPA, you serve in the restaurant owner, you serve in the general contractor, you serve in the landscaper, you serve in the home health care agency owner, you serve in the real estate professional, you don’t have enough time.

to learn the nuances. You don’t have enough time to master all of the things in each of all of these industries as to be the best that they can be out there for each of them. So I really think it’s a very bad approach to go with.

Scott Bursey (11:09)
Point well taken. Let’s talk about risk. If a real estate pro is, we had to go down this road, didn’t we? Absolutely. This is one that I know our audience is really going to ⁓ pay close attention to. Let’s just say this, if a real estate pro is trying to be aggressive with their filings, what is the fastest way they might ⁓ unintentionally trigger an audit?

Michael Uadiale,CPA (11:11)
Thank you.

So let me put this out there for whoever is listening. And I’m saying this very loud and clear as I can to whoever wants to be wise.

The IRS is getting as smart as every one of us out there. And what I mean by that is with the advent of AI, the IRS has about 50 to 68 AI projects they are working on, which I think if they get all the funding they need in the next two to three years, all of those 50 to 68 projects will be completed.

It’s going to make it very easy for the ⁓ IRS to begin to do more audit without throwing more bodies into the audit. And what that means to your point, Scott, all these games that people play to try to reduce their taxes, the IRS will be easy to sniff them out. So to answer your question, it’s not worth it.

for anybody to be playing games in how to reduce their taxes. Because honestly, I believe that the Internal Revenue Service Tax Code, it’s a roadmap. It’s a playbook on how to reduce your taxes legally, ethically, and morally. So my point to anybody listening is why do you have to play games if there’s already a roadmap for you to legally reduce your taxes?

The government is not asking you for more money. Honestly, the government is not, especially as a real estate professional. There are just gazillions of ways that the real estate professional can pay zero taxes year over year, year over year. Because when you look at our totality of our tax code, I believe that the real estate industry is the one that has gotten the best out of the tax code.

I am stopped if somebody is saying they’re having to play games.

Scott Bursey (13:33)
Absolutely. Follow that roadmap that’s been laid out and you’ll be just fine. Don’t play the games. Point well taken. Now, Michael, I know that you’re an author. Could you talk about your book, please?

Michael Uadiale,CPA (13:40)
Exactly.

My book is written, is titled, The Disability CEO Playbook. So our firm, we specialize in two niche areas of practice. One of them is real estate industry. So we deal with the real estate professionals of every spectrum. Okay. Now the second area that we are very big on is the home healthcare industry. All right.

So the book is titled, The Disability CEO Playbook. Now this book is for any home healthcare business owner who lies awake at night wondering why there’s never enough cash in their bank accounts. Even though their business is busy, their clients are being served, their staff are working. It’s for the owner who started this business because they had the love for someone in the community or the family, but yet,

they’re struggling to make ends meet. So my idea in writing this book is having served this industry over the last 12 years, particularly. This is really a playbook. mean, it’s not just a book, it’s a book with a lot of tools and checklist. I really wrote this book to serve business owners who have home health agencies.

to see how they can move from zero to whatever amount of money they want to be able to make. You may already be successful if you want to turn your ages into a legacy. This book is your go-to. In fact, I’m excited about it. I can’t wait for it to hit the market in the next five, six weeks. And I will be on some speaking engagements across many trade shows and conventions with the book.

Scott Bursey (16:13)
Awesome, and that’s one book our audience is going to want to pick up. Michael, to wrap it up, if you could give our listeners just one ultimate high level strategy to maximize their long-term tax benefits, what would you tell them?

Michael Uadiale,CPA (16:28)
That’s simple.

Be constantly an investor.

Because as long as you are investing, this tax code itself rewards you for investing, especially in real estate. If you are a constant investor, you will never be lacking for tax deductions to help you get to better place.

Simple.

Scott Bursey (16:50)
There you heard it. Simple words, but yet very powerful statement. Thank you for that advice. And Michael, thank you for providing such powerful insights on how to save money on taxes. For our listeners who are ready to stop leaving money on the table and want to explore implementing these specialized tax strategies, what is the best way that they can connect with you?

Michael Uadiale,CPA (17:00)
Thank you Scott.

My pleasure.

The easiest way to connect with us is an email. We have an email address is [email protected]. So [email protected].

⁓ Our marketing rep is constantly on that email where we get a lot of inquiries. But again, we work with people that we would be a great fit for. Unfortunately, we are not able to work with everybody. Typically, we have some other business, mean, other professional relationship. If somebody comes to us and we do not think we are their best fit, we do make recommendations to them. But

If you send an email and say, hey, you found me on this show, they definitely prioritize such email and they schedule you to meet with me for a 30 minutes discovery call.

Scott Bursey (18:13)
Excellent and that discovery call would be well worth it. thank you so much for

Michael Uadiale,CPA (18:18)
Absolutely, it’s complimentary.

Scott Bursey (18:22)
speaking with an expert. There we go. Michael, thank you for being on the show.

Michael Uadiale,CPA (18:26)
Thank you, Scott. It was my pleasure and I look forward to having time to be here again.

Scott Bursey (18:32)
Absolutely, you’re welcome back anytime. And thank you to our listeners for tuning in. If you found value in today’s episode, please make sure you’re subscribed. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.

Michael Uadiale,CPA (18:34)
Thank