How to Slash Your Tax Bill for Real Estate Investors

Shauna, The Tax Goddess (00:00)
What?

Okay, well, I’ve got to back up a little bit because I actually started in astrophysics ⁓ Ended up switching into right totally different ended up switching into tax because one numbers are easy for me and to Absolutely love playing the game. So taxes is we always consider it like a chessboard You know, you have different pieces and all of those pieces have rules and as long as you’re following the rules doing all the things you’re supposed to do You’re able to capture the king which

Scott Bursey (00:05)
Hmm.

Shauna, The Tax Goddess (00:30)
generally for most people is paying very very very very little tax.

Scott Bursey (02:07)
Welcome back to the Real Estate Pros Podcast. I’m your host, Scott Bursey. And today we’re cutting through the noise to talk about one of the things that separates the hobby investors from the true real estate titans, wealth preservation. You can find the best deals, flip the fastest houses and command the highest rents. But if you’re handing half of your hard earned profit back to the IRS, you’re running in a treadmill that never stops. That’s why today’s guest is a literal legend in the game.

She’s not just a CPA, she’s a strategic weapon for your portfolio. And she’s known as Shauna, the tax goddess. Shauna is here to show us how to legally, ethically, and aggressively slash your tax bill so you can keep your capital where it belongs in your next deal. Shauna, welcome to the show.

Shauna, The Tax Goddess (02:54)
Aw, thanks so much for having me. I’m excited to be here.

Scott Bursey (02:57)
We are excited to have you. For our listeners who may not be familiar with your journey, please tell us where your career began and what the focus is today.

Shauna, The Tax Goddess (03:07)
What?

Okay, well, I’ve got to back up a little bit because I actually started in astrophysics ⁓ Ended up switching into right totally different ended up switching into tax because one numbers are easy for me and to Absolutely love playing the game. So taxes is we always consider it like a chessboard You know, you have different pieces and all of those pieces have rules and as long as you’re following the rules doing all the things you’re supposed to do You’re able to capture the king which

Scott Bursey (03:13)
Hmm.

Shauna, The Tax Goddess (03:38)
generally for most people is paying very very very very little tax.

So it’s been quite quite a journey from the astrophysics side but I am now a CPA with a master’s in taxation, certified tax coach, certified tax professional, and certified tax strategist. What’s put me in the top 15 in the country for what I do.

Scott Bursey (04:02)
Awesome! Wow! Talk about specialization. Let’s jump right into the core of tax planning for our listeners. For real estate investors dealing with multiple entities and state lines, what are the two most common tax pitfalls you see, Shauna?

Shauna, The Tax Goddess (04:06)
you

⁓ well, one of the biggest ones is if you have any people going between state lines. So, for example, if you have your favorite handyman or your painter, whoever, and they are a part of your team, part of your crew, they’re crossing state lines, you’re going to have multi-state taxation issues. You may also have, so nexus is a big term that you’re going to hear. You may also have some sales tax and remittance tax type collection issues, transaction privilege tax issues. And so if you don’t

have if your local CPA is only familiar with one state and they don’t know the other state, you can actually get yourself into some pretty hefty trouble with the other states if you’re not properly reporting the taxes, the amounts owed, the different kinds of licensing you need, that kind of thing. So working with a CPA more familiar or maybe a potentially a little bit larger of a firm that can do multi-state tends to be a really good idea in that case.

Scott Bursey (05:15)
I would say, and on that note, what is your market, geographical market?

Shauna, The Tax Goddess (06:08)
So the benefits of being a tax lady taxes unfortunately are at the federal level which means it doesn’t really matter which state you’re in. We can help anyone. It doesn’t matter what country you’re in. You could be living overseas but paying U.S. taxes. So it’s really more a question of how much in tax are you paying? Which state do you live in? So California and New York they tend to be a little bit higher on the tax rates than your Florida or Texas. And how much tax do you really want to pay?

Scott Bursey (06:40)
In the tax goddess, I must ask you this. What proactive structuring advice do you give to clients who are scaling their investment portfolios?

Shauna, The Tax Goddess (06:50)
Yeah, so one of the biggest mistakes that we see is people mixing passive investments with active investments. And mixing those things, you can cause not only tax issues, but also legal issues, insurance issues, just across the board. So one of the things we highly recommend is generally some sort of a management company who can manage both passive and active. And that separates the operating day-to-day type of activities from something that’s purely

just an investment. for example, if you got into a syndicated large commercial property, that’s pretty much going to be passive for most people. You want that kind of on its own, separated, segregated from your active where you’ve got a short-term renter who trips and falls and tries to sue you over the hot coffee that landed in their lap, that kind of thing.

Scott Bursey (07:43)
Understood, and that preventive planning is everything.

Shauna, The Tax Goddess (07:48)
Absolutely. Yeah, you can either pay for it now when it’s $500 to set up the LLC, or you can pay for it then at $50,000 in whatever lawsuit or tax issues because the numbers don’t jive, that kind of thing.

Scott Bursey (08:02)
And moving on to real estate specific deductions beyond basic straight line depreciation. What are the most overlooked deductions perhaps related to cost segregation or short-term rentals that real estate investors consistently fail to leverage?

Shauna, The Tax Goddess (08:20)
Well, I feel like there’s some of the easy, the low hanging fruit, you’ve named two of them, right? Cost segregation. So you go into your building, whether it’s a residential or commercial, you’re pulling apart all those components to speed up the depreciation sooner. You’ve got short term rentals where especially if you have a W-2 and you don’t know how to write off taxes against the W-2, short term rentals can be extremely helpful. But there’s also quite a lot of other deductions that people don’t really think about. And generally what we look at is

where are you currently spending money? So for example, let’s say your kids, you’ve got a 10 year old and you’re paying them an allowance every every week or whatever to go mow the lawn. Well, if they’re mowing the lawn of the rental property, that’s a business expense. So we need to make sure that we’re tracking where all the cash is going. So things like paying your kids, writing off your dogs for security while you’re going around collecting rent, depending on how large your portfolio is, you may

and look at things like captive insurance, which would allow you to take a maximum of 15 % of your gross revenue and have it tax free for life. So there’s a million options and really the way we tell people to approach it is look, start with looking at where you’re currently spending money and how do you tweak those things to make them business expenses versus just cash out of pocket.

Scott Bursey (09:43)
If I’m hearing you correctly, doesn’t necessarily have to be sophisticated strategies.

Shauna, The Tax Goddess (09:49)
Nope. Honestly, most of the time when we look at that low hanging fruit, when we look at that baseline strategy, we find 20, 30, 40, $50,000 a year that people have been paying in extra taxes that they didn’t even know that they could deduct. So one of the things that we recommend is going backwards and looking at previous returns.

If you’re starting to do tax planning now and you go, yeah, I totally paid my 10 year old to do the lawn. Why didn’t I take that three years running in the tax returns? Go back to your CPA, find out, come with a list prepared of these are the expenses that I forgot to give you. Is it worth amending the returns? Maybe you can get some cash back.

Scott Bursey (10:32)
There you go listeners. Let’s discuss compliance, Shauna. In an environment of increased review, what is the single most critical practice real estate investors should implement today to ensure they are audit proof, particularly concerning documentation and expense tracking?

Shauna, The Tax Goddess (11:26)
I was just about to say document, document, document, all the things. My favorite way to document, if this helps, is take a picture. Start learning to take pictures of everything. So the instant you sign a receipt for something, take a picture. If you’re buying something and it’s for the property, take a picture. If your kids are doing the lawn in front of the building, take a picture of the kid doing the lawn in front of the building. Anything you can do to document, extremely helpful. There are, especially if you’re trying to prove

that you’re a real estate professional or that you’re doing your material level and ⁓ hours you know your hundred hours more than anybody else. ⁓ There are some great apps that you can download for your phone where you can track your hours on the phone. IQ is an amazing app for tracking your mileage back and forth between your properties or to Home Depot whatever it is that you’re doing. ⁓ really at this point especially with AI if I were in real estate I would open up a little chat in AI and say I’m a

short-term mental investor what kinds of apps tools whatever I have that I can use to make my life easier because they are literally coming out with new tools every day so

Scott Bursey (12:37)
Diligent documentation is the foundation of any sound tax strategy. If you can’t prove an expense with a paper trail, it doesn’t exist, does it Shauna?

Shauna, The Tax Goddess (12:43)
100 %

You’re done. You’re done. This is so we use something called the aggression scale zero to 10. And this is about how aggressive do you want to be on your tax term? So zero meaning the IRS never calls you never ever, but you’re leaving money on the table and 10 mean we’re all going to jail. Now, right, you just made the face. So we tell people, listen, know, a 10 is going to jail, a nine is doing Al Capone. You’re doing shady stuff and you’re hoping you don’t get caught. OK.

And eight is pushing the envelope, but if you get audited, you have all the documentation. And that’s for most people, that’s where they want to be. Like they, I really don’t want an audit, but if I get one, all the T’s are crossed, all the I’s are dotted, here’s all the paperwork, here’s the binder with all the stuff you could possibly want. And if you don’t have it, you may want to consider reducing your aggression level to a four or a five. So you’re further away from the potential of being audited.

Scott Bursey (13:47)
documentation, documentation, documentation. Absolutely. Thinking about business owners and team leaders. When a real estate team is moving from hiring contractors to full-time employees, what key tax implications like payroll taxes or benefit deduction should they be prepared for?

Shauna, The Tax Goddess (13:51)
Of course.

Yeah. Welcome to the world of having employees. Payroll taxes, of course, having someone who deals with HR, making sure that you have a proper attorney to draft up the actual agreements, especially if you’re going from contractor to W-2. ⁓ From a tax perspective, you want to try to hold out as long as possible on switching somebody to W-2.

because generally if you’re the owner of the business, there are tax strategies that you can use for you, but if you use them for you, you have to apply them to all employees. So a perfect example is medical expense reimbursement programs. If it’s you and your wife and your two kids and they’re doing the lawn and painting the house and doing the thing, you can cover everybody’s medical expense, but the instant you add like an outside party, you your first W-2 employee,

If you leave the medical program in play, you have to cover their expenses too. So you start to lose the ability to have benefits once you have W-2. So just be cautious about which benefits, what strategies you’re using when you add W-2 employees. Otherwise it might bite you.

Scott Bursey (15:22)
great advice there. And let’s take a step ahead here and look at potential regulatory changes. Shauna, if you could give real estate professionals one piece of advice regarding potential future tax legislation or expiring provisions such as bonus depreciation, what forward thinking strategies should they implement starting now?

Shauna, The Tax Goddess (15:27)
Sure.

Yeah, definitely do your cost segs right now. You got 100%. Okay. I think the biggest thing, and we get asked this question a lot, ⁓ know, Trump said, and I’m not here to talk politics, I’m here to talk tax law, right? Trump said that the new bonus depreciation is permanent. Permanent is a very strange political word.

because every president in the past has said, I’m putting this new rule and it’s going to be permanent. And as soon as the next president gets in, it is no longer permanent. So I would suggest if you’re in today’s current environment, take advantage of any law, all of them that you have right now, which often means that your current CPA who’s been doing the same thing that they’ve been doing for 20 years, filing your returns may not be up to date on the current changes, the things that need to happen right now, especially considering we’re

We’re right in middle of tax season right now. They’re probably face down preparing tax returns. They’re not thinking about changes coming. Okay. So make sure that you don’t only have a CPA on the team. A strategist is another leg on the stool here, just like your attorney, just like your insurance guy, right? This having a tax strategist is a separate piece of your overall financial health.

Scott Bursey (17:42)
Pack slots are always evolving and the best defense is a proactive strategy.

Shauna, The Tax Goddess (17:45)
Absolutely.

Absolutely. Yep. Well court cases change literally every day. So unless you’ve got somebody who’s reading the newest court cases coming out every day, you don’t know what the new laws are. So.

Scott Bursey (18:03)
What are the core strengths of the tax goddess?

Shauna, The Tax Goddess (18:08)
I think the piece of feedback that we get the most is the ability to explain very complex tax concepts in human English, not tax code. ⁓ And of course, just communicating in general. ⁓ We’ve had, unfortunately, being a CPA is not exactly the sexiest job title for most people. ⁓ I love it, but different matter. ⁓ And so there’s not a lot of CPAs left.

And so many CPAs are being bombarded by new clients, which means the current clients aren’t getting telephone calls back. They might get an email response three weeks later. know, things are just kind of taking a little bit of time. So really when you’re out looking for your team, what you’re looking for is good communication. You understand what they’re saying and fast communication, right? To the best of someone’s ability to actually be able to answer your questions when you need answers.

Scott Bursey (18:59)
Absolutely communication. And I can see that that is a huge strength of yours. And it’s vital. It’s vital. Shut up.

Shauna, The Tax Goddess (19:05)
You’re sweet. If

you can’t understand somebody, what do you do? You can’t even have a conversation. So, yeah.

Scott Bursey (19:13)
And breaking it

down to ⁓ simple language is so critical. It really is. And it’s often overlooked in this arena.

Shauna, The Tax Goddess (19:18)
Yes. Yes. Yeah.

If you can’t understand the concept, how do you expect to be able to implement the concept? Right? You have to be able to understand all the different pieces in the most easy way possible. So.

Scott Bursey (19:35)
What golden nugget or takeaway or some advice would you like to leave with our listeners today Shauna?

Shauna, The Tax Goddess (19:42)
Ooh, if you’re gonna get into tax strategy, it’s not for the faint of heart. Let me say it that way. You guys are real estate guys, okay? You know that real estate’s not a blow-off job, it’s not easy. mean, you’re changing plumbing at 2 a.m. in the morning, okay? It doesn’t matter how big your portfolio is, you’re managing the plumber who’s there at 2 a.m. in the morning, right? Like, there’s always something going on. Tax strategy is very similar. You know, our average tax rate for our clients is 6.92%.

But if you want that, you have to work for it. I mean, I get it that my name, my moniker is the tax goddess. People often say, well, can’t you just wave a magic wand and put me at 6 %? No, I can tell you how to do it, but you actually have to do it, right? So tax strategy is not for the faint of heart, but the payoffs are spectacular, so.

Scott Bursey (20:23)
You

Shauna, we love fostering connections here at the Real Estate Pros. For the listeners who want to follow your journey or collaborate with you, what’s the best way for them to reach you?

Shauna, The Tax Goddess (20:39)
Good.

Thank you, you’re sweet. Well, the easy, I’m pretty easy to find. Type in Tax Goddess. That’s our website, taxgoddess.com. We’ve got a great YouTube channel. I’m always posting new videos, new strategies, talking about success stories. So we’ve got tons on real estate. About 40 % of our practice is real estate related. So yeah, I would say YouTube and the website and you can book an appointment to come talk to us and all the things.

Scott Bursey (21:11)
There she is Shauna the tax goddess everybody and thank you for joining us today Shauna This has been a great conversation with vital insights

Shauna, The Tax Goddess (21:21)
I love it. Well, thank you so much for having me.

Scott Bursey (21:24)
And for our listeners, we appreciate you. If you got value out of today’s episode, please subscribe. We have more conversations coming up with exceptional operators, just like Shauna. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.