Maximize Your Wealth: 5 Essential Tax Strategies for Real Estate Investors

John Harcar (00:02.258)
All right. Hey guys, welcome back to our show. I’m your host, John Harcar. And we’re here today with Daveed Tuck. And we’re going to talk about, you know, besides his journey in business, we’re going to talk about different tax strategies that you can use in real estate. Remember guys, at Investor Fuel, we help real estate investors, service providers, I mean, all real estate entrepreneurs, 2 to 5X their business. And it’s by providing tools and resources to build the business you want to have.

which in turn helps live the life you’ve always dreamed of. So Daveed, welcome to our show.

Daveed Tuck Ex-IRS Auditor (00:36.098)
Thanks for having me. I’m excited to be here.

John Harcar (00:38.043)
Yeah, I’m excited to talk about our topic of tax strategies. We all know we want to, you know, to be able to save money and, and obviously do the best we can on our tax part. But before we talk about that and get into the weeds, tell our audience a little bit about you, kind of your background in business, you know, if you do anything in real estate and kind of what got you to today.

Daveed Tuck Ex-IRS Auditor (00:59.426)
Yeah, absolutely. So real estate is powerful and they’re not making any more of it, right? So we want to capture it and there’s so many tax advantages to owning real estate, to being a real estate investor, to being a real estate owner, as well as it’s it’s sexy, it’s fun, right? mean, houses and buildings, it’s just, it’s art, it’s…

John Harcar (01:03.901)
hehe

Daveed Tuck Ex-IRS Auditor (01:20.042)
It’s amazing. And so also that’s freedom, right? Having land, having that room to just be yourself, right? And not worry about the speed limit or whatever. Just have your kids ride ATVs. I grew up on the farm. I grew up out the wheat fields of Sherman County and everybody was farmer kids or they worked for farmers or whatever. And so there’s quads and motorcycles and all the fun stuff, right? And everybody had trucks and it was all business right off. And I was like, these guys are smart, right?

were deducting boats and and helicopters and planes and stuff because they need them in their business, but it’s all revolved around real estate and They’re smart farmers. There are Stanford PhD professors that were farmers and Farmers are smart. So Real estate is everything having land having that autonomy having that freedom I mean who doesn’t want to have a little bit of land to kind of homestead and stuff like that. So real estate just really got to me. I’m like

Yeah, this is this is where it’s at and so I got my degree in accounting then went to work for the IRS as an auditor before I gave him the finger and walked away But I really cut my teeth on taxes cut my teeth on what the IRS is looking for and why and now I want to empower people I want to tell my secrets and give those secrets out and be like let’s all save money on taxes Let’s do things legally. That’s going morally and aboveboard, but let’s pay the least amount of taxes So part of it’s dumbing it down and part of it’s educating right and trying to meet in the middle type of thing

John Harcar (02:36.53)
Mm-hmm.

John Harcar (02:49.506)
Right. What made you decide back in, and if you ever watched any of my podcasts, I’d like to go back. What made you decide to do anything with the IRS and tax auditing and all that stuff? Have you always been a numbers guy?

Daveed Tuck Ex-IRS Auditor (03:02.338)
Well, it’s more law, right? The numbers are more third grade math, right? So the math’s not very difficult. It’s more application of the law and knowing the law. But more than that, it’s knowing people, and especially dealing with IRS. A lot of people think, the IRS and tax law is black and white. No, there’s so much gray in it, and it depends. It’s up for interpretation. Who wrote the tax law? A bunch of attorneys. Who interprets the tax law? A bunch of attorneys. Who says the law is the law of when

John Harcar (03:05.647)
Okay, right.

John Harcar (03:25.714)
Mm-hmm.

Daveed Tuck Ex-IRS Auditor (03:32.224)
And the law is the law. A judge, right? Who’s an attorney. So if you read the tax law, it’s complicated. It’s mumble jumbo. It doesn’t make sense to the average person. Why?

is written by attorneys. So I wanted to get a head up and I looked at entrepreneurship. looked at Warren Buffett, right? He was a big inspiration when I was in high school and college and he was an investor. He is an investor and he’s contributing so much to the world by providing jobs, goods and services and small business provides more jobs than big business, than government. And so there’s this aspect of I want to do good. I want to bless people. I want to serve. And so

John Harcar (04:08.69)
Mm-hmm.

Daveed Tuck Ex-IRS Auditor (04:14.35)
being an auditor, going and learning, it’s like getting a master’s degree. And I learned a ton from the IRS and now I’m on the other side helping people. So it was more of a educational experience.

John Harcar (04:25.33)
Still getting hate mail?

John Harcar (04:29.797)
I’m just curious, as an auditor, you ever get like hate mail? Like, why did you audit by it, you know, after you audited someone and…

Daveed Tuck Ex-IRS Auditor (04:36.534)
Yeah, people get pissed. mean, even though I was more of like, I’ve kind of felt like a preparer on the inside and I was like, I’m here to help people. And I kind of said that too many times, too loud. My manager’s like, come here. I’m like, you shouldn’t be saying that. I’m like, it’s a joke, relax. And like, you probably shouldn’t work here. I’m like, yeah, you’re right. So there is a mixed match. Yeah, it’s just, know, everything has seasons. I…

John Harcar (04:43.228)
Sure.

John Harcar (04:53.106)
So what made you lead the IRS?

Daveed Tuck Ex-IRS Auditor (05:03.18)
went, I got the t-shirt, you know, whatever. I did it, right? I learned and then it was like time to move on, time to exit because I couldn’t deal with the bureaucracy. I couldn’t deal with all the red tape and it was just, I’m not a very good employee, right? I’m more of an entrepreneur. I want more autonomy in my schedule and to do what I want, when I want, how I want it. And that’s where being a business owner, being an entrepreneur or being an investor, a landowner, you have more flexibility.

John Harcar (05:17.692)
Right.

Daveed Tuck Ex-IRS Auditor (05:33.056)
freedom, more write-offs too. And when I was auditing, I was recognizing, man, this person that I’m auditing, they’re writing off their breakfast, their lunch, their dinner, their what-if suit, and all this other stuff, their watch, and all this stuff. And I wasn’t able to write off anything. And I’m like, I’m getting hosed. And legally, ethically, morally, they were able to do it because the tax law said. I’m like, this sucks. I’m going to fire my boss and become my own boss and then have a lot more write-offs.

John Harcar (05:45.746)
Hmm

John Harcar (05:58.365)
Yeah.

What struggles did you have when you went and just started on your own?

Daveed Tuck Ex-IRS Auditor (06:05.838)
Yeah, just like with anything, getting clients, getting the word out there and…

You know, having established relationships, I went to lot of networking events, did a lot of presentations, talked a lot, and that was really helpful. So just, I had to hustle. I had to hustle, get business, prove myself, made mistakes along the way, but just learn and just have fun. And right now I’m kind of reinventing myself. I’m doing more podcasts and presentations, and I’m speaking at a group down in Orange County pretty soon, doing two presentations, one on IREC.

John Harcar (06:35.345)
Awesome.

Daveed Tuck Ex-IRS Auditor (06:42.198)
bias and how to negotiate and another one is on learning management tools and having a learning management system to help you and I use Kajabi. Kajabi is great for email marketing, text marketing, having courses, having community, all these things, platforms like branding yourself. Right now I’m branding Anvil Tax but…

John Harcar (07:00.87)
Got it.

Daveed Tuck Ex-IRS Auditor (07:01.92)
It’s like, think everybody needs to have some type of brand and having distribution, doing podcasts, doing books, you know, having a couple books. So I’m writing more books.

John Harcar (07:12.624)
Yeah, we actually had our last mastermind that just passed there in Dallas. We had someone talk about branding. I unfortunately didn’t get to go, now you’re going to be speaking somewhere in Orange County, California. OK, so you grew up. Yeah, that’s cool, man. What’s the group called?

Daveed Tuck Ex-IRS Auditor (07:25.068)
Yeah, Mark, Mark Cole. cool, Nice. Yeah, it’s fine. Yeah, it’s Mark Kohler. Yeah, he’s a CPA’s attorney. It’s the Tax and Legal 360 Conference. This guy is just doing some pretty awesome stuff. part of his community and there’s over 100 accountants, CPA’s, attorneys, financial advisors in their group and a couple thousand people probably gonna show up. That’d be great.

John Harcar (07:36.272)
Okay.

John Harcar (07:48.743)
Okay.

Wow, that’s awesome. And you have your two companies, I think on here, Anvil Tax, and then you also have a website, mytaxsecrets.com.

Daveed Tuck Ex-IRS Auditor (07:59.798)
Yeah, and that’s my learning management system. That’s the Kajabi system, and it has a course on there, which is called my, simple start course, so it’s beginner’s guide.

want people to know what and how, when, why, where the IRS is looking for, how to reduce your taxes, legally, ethically, morally, how to document, document, document. Like in real estate, it’s location, location, location. For taxes, it’s a document, document, document. So these are my secrets that I learned from the IRS, but I want it to be exposed. So this is the learning management system, and I’m just really geeked out about it, and I want to be doing more courses. just takes time. Courses are kind of a lot of work.

John Harcar (08:25.586)
Mm-mm.

John Harcar (08:32.755)
cool.

John Harcar (08:39.632)
Yep. They are. No, they are. So is it just you on your team or what is your team or your business look like?

Daveed Tuck Ex-IRS Auditor (08:46.85)
Yeah, I have some admin and some accountants that help me, but I also network well with other professionals, bookkeepers and attorneys. And it’s like going into surgery, you have a whole team or going on an airplane, like there’s a whole team involved. So I feel like more of a project manager and communicate with other professionals. It’s kind of like in real estate. It’s like you have a general contractor, but then you might need an engineering study because you want to take out that wall.

at load bearing, what do you want to do? And then got painters and different contractors. So I’m not a jack of all. I want to specialize, but I want to try to lead that conversation and lead everybody together to help people to accomplish their goals.

John Harcar (09:31.482)
Awesome, awesome. So let’s start talking about some of these different tax strategies that you can use in real estate. I guess first and foremost, like when it comes to people doing their taxes in real estate and all that type of stuff, what are the mistakes that they’re making? I’m sure there’s a ton that you come across, but what are like maybe the top four or five mistakes that you see people make or three or four mistakes?

Daveed Tuck Ex-IRS Auditor (09:55.476)
Absolutely, and that’s a really great question. I cover this in depth in my course, which is what typically sets off the bells and the whistles for the IRS to come knock and to audit. I call those large, unusual, questionable LUQs. It’s an acronym. Because IRS loves acronyms, right? It is an acronym. So it’s acronym-rich.

So large and unusual question, what does that mean? How is that defined? What is IRS looking for and why? So let’s unpack that a little bit if you have a minute. I can definitely go through that. So if you look at materiality, materiality means how important is it to the overall bottom line or to the income that the company makes. So like for instance, Boeing or Tesla or GM or whatever, right? If there’s a mistake on the books and the financial statements,

John Harcar (10:30.62)
Yeah.

Daveed Tuck Ex-IRS Auditor (10:51.344)
of a million bucks, who cares? A billion dollar company, doesn’t really matter, right, materiality. But if you have a $100,000 company, a $10,000 mistake could be a bloop, right? It could be a material thing. So we look at materiality based upon the size, scope, and all that other stuff, right? So we apply some logic and reasoning and intuition. It’s also looking at something, I’m gonna give another example, a metaphor of, you see a,

a red dot on the wall, right? And that’s all it is. And it’s like, what is that? That’s weird. But if that red dot is tied to a period, maybe there’s a mission statement or a statement and there’s that period. Well, that makes sense. It’s within a context. if it’s just by itself, it’s like, that’s weird. That is part of a large and usual question. Well, you look at a tax turn or if I look in a tax turn, I’m like, there’s a bloop. That’s weird. Why is that? Depending upon materiality, depending upon what happened now, again, there’s fires like down in LA.

or disasters or whatever. Yeah, I mean, there could be these large expenses because of that, okay? But for everything else, for instance, realtors drive a lot, right? Realtors have a lot of miles, so they live in their car. They’re gonna have probably one of the biggest expenses is probably gonna be mileage, and that could be a bloop, right? So document, document, document, and not be afraid of the IRS, but just recognize, yeah, that is a large and usual question, but for a realtor, maybe not.

John Harcar (12:10.086)
Brett.

Daveed Tuck Ex-IRS Auditor (12:20.624)
However, if we can spread things out and to smooth it down and not have it so bloop, then we can hopefully reduce our audit risk, legally, ethically, morally, of course, bring that baby down and let somebody else get audited, right? Let somebody else have a turn in front of the IRS, not me, right? I don’t want to get audited, I think.

John Harcar (12:28.209)
Right.

Daveed Tuck Ex-IRS Auditor (12:45.09)
Good question. Yeah, this is smart, right? So you’re asking great questions. So I look at…

I have an expense spreadsheet and the course is based upon this expense spreadsheet and there’s like 47 different expense categories. Not everybody’s going to use 47 different expense categories, but what we want to break things out into is smaller categories. But I want to put everything into context, right? I’d like to use the example of a dog because I have my dog Willow and I record daily videos down at the park and then we do Willow tax talks, right? So she’s a cute yellow lab and I just love her. She’s sleeping right here.

snoring but anyways so who is the tail wag the dog or the dog wag the tail right and I’m using this example metaphor hopefully I don’t lose you but

We look at what is material, we look at why do we prepare books and records? Well, we prepare books and records and accounting, not just for the tax system, not for reporting and paying taxes, but also for forecasting and for managerial purposes, right? Does this campaign, does this product, does this make sense? Am I gonna make money? Is this enough money that I wanna be making? Should I invest in this? It’s actually a negative ROI.

John Harcar (13:48.86)
Right.

Daveed Tuck Ex-IRS Auditor (14:02.062)
That’s great because it’s bringing in money over here like mini marts, right? A lot of mini marts sell gas to sell cigarettes and Serpies and everything else, right? It’s a lost leader. But if you know that if you’ve done the accounting on it, that’s great You’ve been empowered and you know what that lost leader is and if you took that away how much more sales of chewing gum and everything else and lottery tickets would you lose if you didn’t have that so It’s one of those things in a real estate. I don’t really have a good example quite yet. I wish I did

John Harcar (14:10.116)
Mm-hmm. Mm-hmm.

John Harcar (14:20.753)
Right.

Daveed Tuck Ex-IRS Auditor (14:31.952)
But there could be some lost leader type things to get people in the door to start buying and have more upsells and you can do that with like Kajabi and Selling books and products and you see that all the time you go buy something, know, of course, whatever it’s ten bucks and then next thing you know, it’s 150 or $3,000 you start going up because it’s all these upsells so thinking about what’s to have managerial accounting to break out those expenses into smaller bookkeeping

Let’s make decisions. So if you have managerial accounting and then you’re gonna go the tax return, prepare the tax return based upon managerial accounting, I look at some of these items on the tax return and say, from a linguistic standpoint, does it make sense? I don’t know, what’s blue, right? We’ve agreed that blue is blue because we both agreed on it. But some of these items on the tax return, I’m like, well, okay, I’m gonna just, I’ve got my managerial accounting over here, then I’ve got this tax return, the tax return’s really small, like managerial accounting’s big.

where I’m going with it and I’ve mapped it out so if I get audited that in some of those line items maybe not doesn’t match up exactly and so for these anal accountants who are just like well that that line item says this you can’t put anything up why why

John Harcar (15:40.444)
Hmm

Daveed Tuck Ex-IRS Auditor (15:48.568)
Who says? You know, it’s linguistics. We agreed, but I disagree. And I got my bookkeeping. can prove it. I can verify it. And I’m not gonna create large, unusual questionable on the tax term by lumping everything together into three or four items and then bloop. And then I’ve got all this white space. It’s kind of like in college where you filled out blue books or whatever, wrote essays. And it’s like, you just don’t wanna leave things empty, right? You wanna like fill up the freaking blue book. Yeah. So fill up the tax term.

John Harcar (15:50.055)
Bye.

John Harcar (16:08.338)
Mm-hmm.

Yeah, good analogy. Fill up the blue book. So what other mistakes are people making? Especially with, well, and people you’ve dealt with with real estate.

Daveed Tuck Ex-IRS Auditor (16:19.596)
Yeah, round.

yeah, depreciation. depreciation is so complicated. And especially with, for instance, we can’t deduct the land.

Right? Because we have to allocate and bifurcate out the land versus improvements. So what’s land, what’s improvements? Typically, we’ll look at the county assessment and say the county assesses this building at X amount and the land at this amount. So they usually call it improvements on the county assessors. So we come up with the ratios. In bigger urban areas, it’s probably a 30-70 split. 30 goes to land, 70 goes to the improvements.

And so then we just take that ratio, whatever that ratio is, and then we apply it to the cost of the building. Right? And so, but there’s a lot of other costs that go into it. Closing costs and repairs and maintenance and everything else. So A, the problem is people don’t depreciate correctly or they don’t allocate out the land. They include everything in to the appreciation, including the land, which is a no-no. And so that could be a red flag because depreciation’s

large. Another thing is or they don’t take it at all. And with depreciation there’s something called allowed or allowable. And so when you go sell that property if you didn’t take it you have to recapture it as if you did.

Daveed Tuck Ex-IRS Auditor (17:48.276)
And so that recapture rate is better. It’s a preferred tax rate. It’s lower. It’s sometimes higher than the capital gains rate, but still it’s like a loan. If somebody’s at a 37 % tax bracket and they’re taking the depreciation, but then they have to pay back 25, they have that delta. They have that spread. That’s a loan, interest-free loan. So yeah, I’m going to take that. Yeah, I’m going to have to pay it back. Okay. What if I do a 1031 exchange and bump it up and then I got a new property, I do a cost

John Harcar (18:07.313)
Yeah.

John Harcar (18:10.725)
Right?

Daveed Tuck Ex-IRS Auditor (18:18.16)
segregation study and boom boom boom I go for 30 years now I got this 20 million dollarplex and I can’t do a cost segregation anymore because I can’t find it I mean excuse me I can’t do a 1031 because there’s no other you know 20 million dollarplex because you gotta be like equal or greater value on a 1031

John Harcar (18:35.194)
greater than.

Daveed Tuck Ex-IRS Auditor (18:36.814)
And then you got 45 days, 180 days. It it washes out, especially on bigger deals. And so what if you could do something different? What if you could, as well, somebody might be tired of toilets, tenants, and trash, and taxes because they’ve been doing this stupid game of 1031. They have bases for the last 30 years and it’s like, ah, I just want to be done with the thing. And most accounts are well, sorry you had your fun, you gotta pay the tax. Well, not true because there’s deferred sales trust, there’s charitable remainder.

John Harcar (18:50.659)
And taxes, right.

Daveed Tuck Ex-IRS Auditor (19:06.768)
all these things that we can do on the back end where you don’t have to actually pay that back or pay it back over time instead of getting hit with that big tax tsunami, we can defer that out. And that’s what I get geeked about is like, let’s look at the exit because if somebody is going to exit and they’re like, oh, I got to pay 48 % to the government, fed and stay, especially if you’re in California, high state, high tax state like California or Oregon, man, it’s, it’s a killer. It’s like, why don’t you take it to my, my grave and do a stepped up basis.

John Harcar (19:14.855)
Right.

John Harcar (19:30.62)
Mm-hmm.

Daveed Tuck Ex-IRS Auditor (19:36.728)
keep borrowing, but people are so tired of toilets, tenants, and trash and taxes, they’re just like, I just want to be done. And so they, most accounts, again, they just don’t know these complicated strategies that are reserved for the 1%. But I’ve done due diligence, I help people, and I get excited about that because if we can reduce that taxes legally, ethically, morally, defer them out over time, you don’t get hit with that tax anomaly, you can reinvest it in other things. You can buy a franchise or do

John Harcar (19:51.548)
Right.

Daveed Tuck Ex-IRS Auditor (20:06.648)
other things with it. Great.

John Harcar (20:08.562)
Cool. If folks are out there that are listening to us, you know, and they want to get in touch with you, I mean, you obviously have that, that ebook or that, you know, that what you have, I think was on your, uh, what is it? The word it go your tax secrets.com right there. Can they get ahold of you there or how, if they want to talk to you about their tax issues, how do they get in touch with you?

Daveed Tuck Ex-IRS Auditor (20:17.966)
Yeah.

Daveed Tuck Ex-IRS Auditor (20:24.268)
Yes, yeah, mytaxsecrets.com.

Daveed Tuck Ex-IRS Auditor (20:30.732)
Yeah, Anvil Tax is probably going to be the best. AnvilTax.com is going to be the best, or even at My Tax Secrets.

John Harcar (20:41.254)
Okay, yeah, we’ll post those back. Is there any any last advice you might want to give our listeners regarding taxes? Strategies, etc

Daveed Tuck Ex-IRS Auditor (20:51.372)
Yeah, and I think I do, and it’s keeping receipts and keeping things electronic because the way I’m seeing as the IRS is getting the chainsaw and cutting in half, the IRS is typically, Congress gives IRS a dollar and IRS gives Congress back $37, right? So audits are real big deal. And as the auditors or humans are getting cut, AI is going to start replacing it, has to, because it’s cheaper. But how do you negotiate?

with an AI, you got to keep receipts. Receipts, receipts, receipts. Keep them electronic. There’s a lot of great apps out there for that.

John Harcar (21:29.491)
Okay, cool. All right, well guys, I hope you enjoyed this show. David, thank you for coming on and talking about all that. I hope you got some good notes. I know I did. And I look forward to seeing you guys on the next one. Cheers.

Daveed Tuck Ex-IRS Auditor (21:42.968)
Cheers. Thank you.