Short-Term Rental Tax Strategy: Crush Your W‑2 Bill With Cost Seg

David Wiener: Most investors obsess over finding the next deal. The investors my guest today and I work with obsess over something completely different, never writing a six figure check to the IRS ever again. And so in this episode, we're gonna show you how high income W-2 earners and business owners are using short-term rentals, plus a properly structured cost segregation study to legally crush their tax bill in year one without needing real estate professional status. So you've ever looked at your tax return and thought, there's just gotta be a smarter way than this, stay with us. I've got CPA and real estate investor Ryan Bakke here, and we're gonna walk through the exact playbook, the guardrails, and where people get this strategy wrong. And stay with us because we've got some great free resources for you later on. Welcome back to the Tax Strategy Playbook. I'm your host David Wiener also known as Mr. Cash Flow. I run Cash Flow Strategies, Incorporated, and I work with Cost Segregation Services, or CSSI, where my team and I help real estate investors and business owners legally engineer their tax bill down using advanced strategies like cost segregation, 179D, and specialty credits. I spent years in the trenches with investors, CPAs, and tax pros all over the country looking at real returns and real deals, not just theory. The show's where I bring those conversations to you. Every week we break down what's actually working right now to keep more of the money you're already making, and we talk with people who are doing it at a high level. If that's helpful to you, go to TaxStrategyPlaybook.com, subscribe to our newsletter, you'll get regular updates. and access to resources that can help you along the way. Today we're diving into one of the most powerful plays in the current tax code. And I've got a guest who lives and breathes this stuff every day. Today I'm joined by Ryan Bakke Ryan's a CPA, a real estate investor, and the founder of Tax Strategy 365. He's helped thousands of investors understand how to use real estate and smart tax planning to keep more of what they make, especially with short-term rentals and the STR loophole. He runs a fast-growing education platform, works directly with investors across the country, and he's in the trenches seeing what works under today's rules, not five years ago. Ryan, thanks for being here, man. I've been following you for a long time and wanted to have this conversation with you for quite a while.

Ryan Bakke, CPA: I'm happy to be here, David. Thank you.

David Wiener: I'm happy to have you. Let's start right at the top because I'm not sure I like the term short-term rental loophole. Sounds sexy and all, it's not really a loophole and people don't really know what it means. So when you talk about the short-term rental loophole, ⁓ do you actually mean in plain English?

Ryan Bakke, CPA: would say a lot of tax code sections get mistaken for loopholes. Like we've heard people say that a 1031 is a loophole, selling your primary residence with no capital gains is a loophole. But the short-term rental loophole is loophole in a sense that when they wrote the tax code for short-term rentals, they did not anticipate people like you and me and the listeners of the podcast running like bed and breakfasts or like Airbnbs. that code section was written Airbnb wasn't even a thing. And you go back a long time, pretty much up until 1986, all income was income. So it didn't matter if you made it in a business or your W-2 or a rental property up until 1986, like all income was income. And then that's when ⁓ Congress together and said, well, wait a minute, like this doctor over here shouldn't be able to buy real estate and offset his practice. with these paper losses, right? So we're going to go ahead and change this. then real estate, as you know, they have some of the best lobbyists in the country. So in 1993, they rewrote the laws to implement this thing called real estate professional status, which is if you were a full-time realtor, property manager in construction, you can take your rental losses against your rental business income. When they wrote those laws, they also introduced the material participation rules. which those are what allow us to use short-term rentals because with short-term rentals we only have to meet lower requirements like a hundred hours and more than anyone else for us to use our losses to offset our W-2 income. So when they wrote those rules they didn't anticipate for people like you and me to take advantage of it. They were more so thinking about like property management companies, know, think like Smokey Mountain Tourist destinations. They didn't anticipate us doing it and that's why I think it's a loophole.

David Wiener: Okay, well maybe it is a loophole. Give me just a quick example of somebody that you've worked with who used this loophole correctly and dramatically cut their tax bill.

Ryan Bakke, CPA: I remember the first investor, one of the first investors that we worked with, where I think we really changed their life. They were both ⁓ tech workers at Amazon working hundreds of hours a week, right? And they had a couple of long-term rentals that had a lot of equity in them. over the time, owning those long-term rentals, there was this huge loss that was sitting on their tax return because they were not real estate professionals. And I remember working with them, said, Hey, you guys should really consider selling these properties and buying short-term rentals because with short-term rentals, you would actually be able to use those losses to offset your guys' W-2s instead of just having those losses carrying forward. And so that's exactly what they did. They sold two long-term rentals, took the equity. The first year they went and bought three properties, three short-term rentals. They were able to pretty much wipe out their W-2s, $500,000 $600,000 W-2s with the three short-term rentals. And then they just, they kept going from there. They took the 200, know, 180, $200,000 that they saved in taxes went and bought more properties. Uh, eventually I want to say by the time they had five properties, one of the spouse was able to quit their job at, at Amazon. And now they just managed their short-term rentals. They have nine properties and they don't work W-2s anymore. And they live on 250 to $300,000 a cashflow per year. And they have a, they have a young family and I love them.

David Wiener: Fantastic.

Ryan Bakke, CPA: I love them.

David Wiener: That's great. And we're going to show you in a minute how when you pair that with cost segregation and bonus depreciation, even one property can generate a loss big enough to hit your other income. Let me ask you this. Who is this really for? it mostly high income W-2 folks? Is it business owners ⁓ is it any investor with a spare bedroom and an Airbnb listing?

Ryan Bakke, CPA: So for the short-term rental loophole specifically, I think it's designed for high-income earners, W2. W2 people especially, W2 people only have access to certain deductions and write-offs. HSAs, tax-deferred accounts, have more babies. That's about it if you're a W2. But even if a W2 and you bought long-term rentals, that's not going to save you. You need to buy short-term rentals. implement cost segregation studies, that's who it's really saving a lot of money for. W-2 earners, business owners that want to invest in real estate should invest in short-term rentals so that they can offset their tax bill.

David Wiener: Okay, so that is super powerful conceptually, but let's make it practical. If somebody says, I want to do this in the next 12 to 18 months, does that path look like? Walk us through the basic rules. rules that somebody has to understand average stay, material participation, how this becomes non-passive so that it can offset their W-2 and business income.

Ryan Bakke, CPA: First, I think it starts with identifying your buy box. Like if you've never ran a rental property before, it may not be a good idea to buy a million dollar property that's going to have a $6,000 a month mortgage, right? But you've kind of first start with your buy box. Like how far away do I want it to be? Can I get there by driving to it or do I have to fly to it? What area? Is it an area that I would actually vacation in? Like I'd take my family to? You start with your buy box and then you go and Once you acquire the property, you got to remember these two rules specifically. It's, have to have an average of seven days or less stay. That makes the rental property not treated as a rental and instead it's a business. So I have to have an average of seven days or less stay. So if I had 150 days rented the property, and let's say I had 50 different guest booked. So my average is three, right? It's 150 divided by 50, which is three. So I'm good. I'm less than seven. And then I either have to meet, we normally have our clients either hit one or two tests and you don't have to hit both, but you have to hit one or the other. So easiest one is you have to spend a hundred hours, material participating in your short-term rental and more time than anyone else. So I hit a hundred hours. Let's say I'm responsible for renovating the property, adding the furniture, doing the guest communication, getting the listing live on Airbnb. I have to spend at least 100 hours doing those types of activities and I have to spend more time than any other person that's working in my property. Well, who might these other people be? Mostly cleaners, handymen, and contractors. I have to make sure that I have at least 100 hours and that my time is more than them.

David Wiener: Before all of them or any one of them?

Ryan Bakke, CPA: Any single one, which is where it gets interesting. So in essence, I can have 110 hours, let's say, and my cleaner can have 80, my handyman can have 50. And even though that their hours total more than my time, I just have to beat them out on an individual level. It's interesting to say the least. If it's a cleaning company, it's actually per cleaner too. It's not the entire company.

David Wiener: That's good to know.

Ryan Bakke, CPA: which, don't ask me how we found that out. spent, I had to dig deep and figure out what an actual individual means for the purposes of material participation. There's a 273 document by the IRS that tells you what exactly an individual is, if you believe it or not.

David Wiener: I believe that the IRS loves their documents about everything. are the biggest misconceptions people have about it? ⁓ are investors messing it up?

Ryan Bakke, CPA: ⁓ I would say they mess it up if they decide that they want to have a property manager or want to have an Airbnb. We call it co-hosts like have somebody manage your property for you. If you have somebody manage your property for you, think about it. You're going to be deducting their fee as an expense. The IRS is going to see that management fee on your tax return. And if you're also trying to do the loophole, ⁓ The IRS is going to be like, well, how could you possibly be materially participating and spending more time than the manager? Like, what are you paying the manager for? Right? So especially in that.

David Wiener: And your time has to be very well documented.

Ryan Bakke, CPA: especially that first year ⁓ you buy and put a property in a service. There should be no other people managing it other than you. And got to keep good time records. Historically, we've used Excel templates that I've given out before to clients. That's what you can use to track time. I know there's apps now for time tracking, but you have to have really good documented hours of ⁓ what you ⁓ because you need to submit the time logs with your tax return when you go to file it. But if you get audited, it's going to be one of the things that they ask you about is, you know, show us your material participation time log that proves that you spent 100 hours and more than any other person.

David Wiener: and you better be able to provide it.

Ryan Bakke, CPA: Yeah, you also like the worst thing. Now the IRS does allow you to called ⁓ recreate the time log under audit. They do allow that. However, ⁓ going to look at that with the raised eyebrow, especially if you're, know, hey, I know I spent a lot of time two years ago, but I don't know exactly what. So I'm just going to put, you know, five hours this day, eight hours this day in huge blocks. You want to avoid that, really want to be doing your time in probably like 30 minute increments.

David Wiener: So let me layer on how cost segregation fits into this because this is where the numbers go from nice deduction to wow, this really changes my year. If you buy say a short term rental, a cost seg study can typically reclassify a chunk of that property into five, seven and 15 year assets. Things like furnishings, cabinetry, certain finishes, land improvements, those kinds of things. Those can be depreciated much faster and with

Ryan Bakke, CPA: Mm-hmm.

David Wiener: bonus depreciation, can all be taken the first year in many, many cases. So from your perspective, when somebody's planning this, should they be thinking about cost seg before they buy, after they furnish, after a renovation? What's ideal from a planning standpoint?

Ryan Bakke, CPA: ⁓ so many things I'll start with before you and buy the property The location of where you buy the property matters a lot so ⁓ the for example can't be depreciated so clients who buying properties in you California 30A, a Destin, Gullf Shores Pretty much any beach market, you know, like if you're gonna be buying a property there you have to really understand like, how much money am I going to actually save? I had a client who bought a, bought a million dollar property one year in the Smokies. Smokies, I've never seen the land be worth more than 10 % in the Smokies, saved six figures in taxes. Then she went and bought a property in Gulf Shores the year after that, saved only 30 grand in taxes. Well, it's because the land in Gulf Shores is worth 65, 70 % if you're buying a single family home. So we teach our clients, you hey, you want to be cognizant of the location if you're really looking to save money on taxes. if you buy condos or townhomes, although they suck from an appreciation perspective sometimes, and you have to deal with ⁓ there's not a lot of land value with condos and townhomes. So you can buy that same million dollar property on the beach. If you want to save the most amount of money in taxes, you got to go condo or townhome. So like location matters.

David Wiener: Absolutely. I just talked to a potential client yesterday about a and a half million dollar single-family short-term rental that he bought in ⁓ Angeles area and when I looked up the land value it was 87.5. He could still do it but he's going to be real disappointed as to how much he's going to be able to deduct.

Ryan Bakke, CPA: 75 % 87. Wow. And everybody, every investor should get in the habit of going on the county assessor website of the property that they're looking to buy two reasons. Number one, ⁓ figure out what that breakout of building and land is going to be, right? That we just talked about. The other reason is if I'm an investor, I want to know how high my property tax bill is going to go up after I buy the property. Cause that sale is going to trigger a reassessment in most municipalities, most cities. And so I want to know like how much money am I going to save in income tax, federal income tax, and how high is that property tax bill going to be? Right. That's why you do this exercise before you even, you know, before you even put an offer in on a property, really.

David Wiener: That's a good idea. That's a good call. I've had to teach so many people how to figure out what the land value is based on the county tax assessor's website because what I generally look for is the percentage that's allocated to land and then apply that to their purchase price because you know the assessment's never going to be the same as the actual purchase price. So let me throw a few real world examples at you from projects that I've worked on.

Ryan Bakke, CPA: Subscribe.

David Wiener: love for you to talk through the tax impact and what people did right or wrong. we have first one high income W-2 couple. They buy a $600,000 cabin. They do about $80,000 worth of furnishings and improvements. We run a cost segregation on it and it generates right around $200,000 in first year depreciation. How does that play out on their return if they've structured it as a short-term rental and they've truly met material participation?

Ryan Bakke, CPA: Yeah, so the way that it breaks out on the return is you take all your income that's not in real estate and you put it in a bucket and we'll just call that a bucket filled with water. As you're filling your bucket with water, your bucket gets higher, so does your tax rate. Okay, so that's why I'm only taxed at 10 % on my first, I don't know, 60, $80,000 if I'm married. Then the next two... 12 % gets taxed or then the next income gets taxed at 12%. So you got 10%, 12%, 22%, 24%, 32%, 35%, 37%. And this is the game changer because we don't want to accelerate depreciation if our bucket's low. We want to accelerate depreciation if our bucket's high, like 35, 37, 32. And so... What that is is basically taking advantage of time value of money. you buy a rental property, you have these ⁓ of tax savings, right? ⁓ it's like I had a piggy bank that my parents bought me when I was one old. And every single year they put $50 in it. And my dad's like, hey, Ryan, you can have this when you're 18 years old. The problem with the piggy bank was it was ceramic and there was no way to pull money out of it. You had to smash it with a

David Wiener: Yeah

Ryan Bakke, CPA: And that's what cost segregation studies are is you have this piggy bank of tax savings that is sitting inside of your rental property. And it's like, do you want to get it when you're 18 years old or 30 years old? I still haven't gotten the piggy bank, by the way. I need to go get it. But do you want to smash that piggy bank and get all the tax savings in year one? Or would you rather stretch them out over 37 years? Well, if I'm a high income earner, 39 years, sorry. Well, if I'm a high income earner and I'm in that 35 % tax bracket, I want to take the savings now. That's what cost segregation does. Like I want those savings at that high bracket. Right. And so, you know, the way it flushes out on the return is, okay, I have this 200,000 dollar loss. Let's say my income is in the 35 % bracket. Well, it's going to multiply by 35 % for a certain extent. And then it's going to multiply by 32 % for a certain extent. And then it's going to go down. And the games and shifts sometimes that we play for our clients,

David Wiener: Absolutely.

Ryan Bakke, CPA: Say they're making half a dollars a year, buy half a million dollars a year, they buy three or four properties in one year. Sometimes we won't zero them out. Sometimes we'll take them down to like the 22 % tax bracket, and then we'll save those studies for a future year when we know that they're gonna be up at a higher bracket. Like there's a lot of gamesmanship and a lot of ways where like we've saved, one example, like I saved somebody $36,000, just by timing up when they should take the cost segregation study.

David Wiener: And this is exactly why I tell my clients, you don't want to have a tax preparer. You want to have a tax strategist. Tax preparers look backwards. You send them your financials, they fill out your tax forms and they send them in. A tax strategist works with you through the year to look forward to see how can we make the best play out of this? How can we strategize everything that you're doing to reduce your taxes as much as possible? Let's look at another case. who already owns a couple of long-term rentals and is thinking, I think you've already answered this, but should ⁓ next deal be a short-term rental so I can reset my taxes? How you coach that person?

Ryan Bakke, CPA: ⁓ First, first we look at on equity return. So, hey, I have this long term rental. It's got 300,000 of equity in it, but only netting five grand a year. Well, five, five thousand goes into 300,000. How many times? 60. I'd have to rent that property out for 60 years just to make back what I could sell it for today before closing costs and Like I would have to rent out for 60 years to make back what I could sell for today. Whereas I can go buy a new property that has a 10 year break even, let's say, right? A short term rental that's going to break even in 10 years before the tax benefits. Right? So I'm able to sell it. That's the next thing that goes, Oh, Ryan, well, if I sell these long term rentals, I'm going to pay, I'm going have to pay a lot of taxes. Well, not if we time it right. We sell that long-term rental in May 2026. We have this equity. go and buy a short-term rental. We get it in service. We materially participate. We can use the losses from the short-term rental to help offset the gain from the long-term rental. That's where timing is super important. The timing of when you do stuff is so important. You want to make sure... We see clients do this a lot with, say, retirement distributions. So I'm going to take money out of my retirement account. I'm going to have income tax, I'm going have a penalty if I'm not 59 and a half. I want to make sure that I put that money into something and make sure that I'm able to take that loss to offset my retirement income. It's got to be in the same year.

David Wiener: It's almost like doing a 1031 exchange.

Ryan Bakke, CPA: Yeah, it's got to be in the same year. Eleanor Roosevelt said, ⁓ life's like a parachute. You got to get it right the first time. We're working with a client that's already done this once, where they took money on retirement. They used it to buy a short-term rental. They used a short-term rental to offset the retirement distribution. Now they have that money that's not in the tax-deferred account. It's in a rental property and it's generating cash flow that they can actually use.

David Wiener: Yeah

Ryan Bakke, CPA: and they're going to do the same thing. And I said, when are we talking about taking out this retirement distribution? Because the later that you get into the year, the scarier it gets. Because if I pull that retirement distribution in October and November, I don't have a property in mind like, well, now I have a tax bill that's due April 15th the following year. the timing is really important when we do this stuff.

David Wiener: So want to look at one more instance because I want to get your opinion on this. If somebody is going to buy a short-term rental and they're going to do some renovations, is it worth waiting on the renovations until later after putting the unit in service if they can so that they can take advantage of partial asset disposition?

Ryan Bakke, CPA: Absolutely, it is. First, I would say we want to quantify what the actual tax savings amount is with the PAD, with the partial asset disposition study. Sorry, try saying that five times fast. Let's say my PAD benefit is $15,000. Well, we don't want to trip over dollars to pick up pennies. So if a client's like,

David Wiener: Yeah

Ryan Bakke, CPA: If I added all these renovations to it now, I could generate an extra $25,000 on my property and revenue and I would get better reviews, better guest booking. I would have a higher ⁓ Like we don't want to, we don't want to like not put that stuff in the property knowing that it's going to make you more money just to save money on taxes. Like we want to kind of do that math of like, Hey, which one am I better off doing? Like, am I better off doing the renovations now, not getting the pad? but I'm going to be able to boost ADR and occupancy of my property or, hey, I don't really think those renovations are going to outweigh what I'm going to save in the pad. You kind of like do that math.

David Wiener: That makes sense. And if you're thinking about doing something like that, you can come to me, get a free estimate on your property. We'll calculate the pad for you, the partial asset disposition, so you can get together with your tax strategist, like Ryan, figure all of that out. So what mistake do you see most often in situations like this?

Ryan Bakke, CPA: Mm-hmm. Overall, would say people, most people would rather be like, hey, how can I zero out my income? I want to pay $0 in federal income taxes here. And it's like, okay, great, we can do that. However, tax planning is not about how can I save the most amount of money in one year. It's how can I save the most amount of money over the course of my life? And so if somebody ends up doing three cost segregation studies in one year, and we're dropping their bracket from 32 % all the way down to zero, That's where we want to introduce like, Hey, you have all this money sitting in tax deferred 401 Ks You should consider Roth conversion. You know, has anybody ever talked to you about a Roth conversion? You know, well, you got a 32 % deduction when you contributed that money. Well, we can convert it over to Roth and you're only going to pay $0 in taxes, 10 % taxes, 12 % taxes. And now that money earns and grows tax free for the rest of your life. So, ⁓ I, ⁓ ⁓ I think about it like shooting pool. So eight ball. When I go to when I go to a bar or I go out and I shoot pool with my friends, they're always like, Ryan, why are you that's an easy shot? Why are you thinking about that shot so much? And I'm like, I'm not worried about this shot. I'm worried about where my cue ball is going to end up after the shot so I can position myself for the next shot. That's what real estate investors have to be thinking. It's like, OK, I'm going to do these cost segs I'm going to zero on my income. But in the process of that, could I have made and saved more money by doing these Roth conversions, ⁓ by timing the cost segregation studies, like by working with the right advisors, like the cost segregation advisor, the tax advisor, so that I could save the most amount of money over the course of my life. lending too. So, you if I go and buy a property at the end of the year in November, December, and I take out a loan, well, that's going to increase my debt to income. And so I'm not going to be able to buy another property most likely until I file a tax return that shows that property on there. You know, the good news with short-term rentals is they'll prorate months. Like say I only had a property in service from October, November, December of the following year. Well, they'll prorate that over 12 months. So I only need to have one year filed for a short-term rental for it to offset my debt to income so that I can do it again. So. It's so like everything is intertwined. know where you buy, what you buy, how you set yourself up for lending. You know one of the big challenges or questions with those clients I was telling you about earlier with their with them leaving their W2s was lending. How you know how am I going to get a loan for another property if I if I lose a $250,000 W2. You know.

David Wiener: Absolutely. Yeah. I'll tell you, ⁓ I've been told, and I believe, a cost segregation study in itself and using that will not hurt your chances of getting a on another property.

Ryan Bakke, CPA: No, because they will add the depreciation. they're Fannie and Freddie underwriters, there's an entire Bible of how they should be, what deductions they should be adding back. And depreciation is one of them. So they're adding back mortgage interest, taxes, property insurance, and depreciation, right? so doing this will not affect your ability to borrow money if you're working with a lender that knows what they're doing. ⁓

David Wiener: Okay.

Ryan Bakke, CPA: but you'd be surprised.

David Wiener: And TurboTax H&R Block are not going to help you do this. ⁓

Ryan Bakke, CPA: No, the software doesn't even, from my understanding, I haven't been in it for a while, but they don't even let you put in the short-term rental loophole ⁓ the software.

David Wiener: No, it's just not a good idea for a real estate investor. It's not a good idea to try and do it yourself or to just use an tax preparer because you lose out on all of these strategies. So if somebody wants to use all of this in the next 12 months, what are the first three decisions they need to make right away, say in the next 90 days?

Ryan Bakke, CPA: The first thing would be the buy box. So identify the buy box. So the process is with that it's like, what am I looking at purchase price wise? It has to be worth my time also. So I remember I was working with a client, they're both doctors, probably making six, $700,000 combined. And their first property was like a $250,000 cabin in Georgia. And it netted like 20, $25,000. And they're like, our goal is to replace our $500,000 W-2 income. And I'm like, okay, we need 19 more of these then if we're going to do that. But the time that it was taking them to manage that property versus what they could be making at their job. So you got to make sure that the juice is worth the squeeze. I call it ROH, return on hassle. It's how much money am I making for an hour of my time? And where could that hour be the most beneficial?

David Wiener: And that's as important as ROI because there is going to be hassle to it. People don't think about that at the start, but it will definitely. So they need to get their buy box together. What else would they need to do?

Ryan Bakke, CPA: Yeah. They need to get their buy box together. There's so many things in the short-term mental nitty gritty of like guest optimization, ⁓ retargeting, running ads, you know, understanding your ideal avatar. ⁓ Who's staying at your Airbnb? Is it families? Is it people visiting friends? Is it bachelor, bachelor parties? Like identifying your customer. then because you buy that property, you have to critique that property for that guest. of the properties that I have is a, is a, a large property in the Smokies. It's got five bedrooms. It's got one master bedroom. A lot of times what we do is we big families that come and stay. like grandparents, parents, kids, everything. And I noticed that, some of the reviews of the other properties were saying, Hey, we really appreciate as the as a couple, not having to go downstairs to make our morning coffee, because our Airbnb host has a coffee machine in the master suite. And I was like, ⁓ that's a good idea. Because they don't have to go down the stairs to wake up the entire family. They can read their book, they could sit on the balcony without having to disturb anybody. And I'm like, I'm going to do that. like, before you even kind of buy the property, understand like, who is who is going to stay at this type of property? And how can I add amenities?

David Wiener: That's a great idea.

Ryan Bakke, CPA: Because then I'll be able to maybe reduce what I think my renovations or my budget's going to be because I know who I'm marketing to in the property.

David Wiener: makes a lot of sense. And on the cost seg side, there are a couple of things we want in place early too. Basic property details, any renovation plans that you have coming up, any closing statements that that lets us run a feasibility study and and show you what the first year deduction might look like before you're in too deep.

Ryan Bakke, CPA: Let me share one more So 90 % of people who hear the short term on a loophole, they get it, they got it. They know what they need to do. average of seven days a less stay, the hours, there's another step further. And what most people do is they get their big refund on April 15th, right? What we help our clients do is say you bought a property in August and you know because you got your cost segregation study done, you know you're going to save $50,000 in taxes. Well, instead of waiting until April 15th of the following year, that's how many months? That's 10 months later. You can just lower your withholding at your W2 job. So you see those savings back quicker. instead of instead of waiting, instead of waiting 10 months to get a refund, Let me go and adjust my W-2 with my employer so I can get four grand back a month, because I'm going to need that money to go do renovations, to maybe pay off a HELOC, get it, you know. So like we take it a step further.

David Wiener: ⁓ Or if they're paying estimated taxes, you could do the same thing with recalculating their estimated taxes.

Ryan Bakke, CPA: Yeah.

David Wiener: Okay, before we land, this has been super practical. Before we land this plane, I wanna make sure people know exactly where to go next, whether they need a tax strategy guide or they're ready to run numbers on a specific property. Last question before we do some next steps. What's one belief that you had about taxes or wealth building five years ago that you no longer believe in today? You've been doing this a long time, so maybe 10 years ago.

Ryan Bakke, CPA: Mine would probably be that... Like you shouldn't guilty about building wealth ⁓ keeping as much money in your pocket as possible away from the government. I think the way that the school system raises people, the way that people's families kind of raise them, it's like, hey, you're not supposed to talk about money. You're not supposed to discuss salaries. You're not supposed to, like all these weird quirky rules about money that exist out there. What I found God gives talents to people that he knows that they can execute it. And when you bless a lot of people in this world, you see it back tenfold. So when you bless, you're a real estate investor, you go buy a property, you fix it up. I fixed up this really bad property one time. And as I was out there ⁓ doing something in the yard, somebody came over and said, that property has been sitting there for four years. Nobody even looked at it. Thank you for buying this and fixing it up. It really was an eyesore. When you buy an Airbnb, how many people are getting blessed? You got a title company, you got a lawyer, you got an accountant, you got cleaners that are going to make money, you have guests that are going to be able to stay there. And so don't feel bad or shameful about building wealth and wanting to keep as much as money away from it, from the government as possible. Because know that you'll put that to good use and you'll bless a lot of other people.

David Wiener: Amen. My dad was a CPA and he always used to tax evasion is a crime, but tax avoidance is mandatory.

Ryan Bakke, CPA: That's a good one.

David Wiener: So if you're listening or thinking, I want a real plan for using short-term rentals to cut my tax bill. Ryan's got a lot of resources for you. I have some resources for you. Ryan, where's the best place for somebody to start with you if they want to go deeper on this?

Ryan Bakke, CPA: We have a new app and you can find it. It's a skool.com slash taxes, skool.com slash taxes. It's a group, it's a $1 to join and you'll get access to a of the templates and the tools that I have there. And a lot of the questions people are able to ask questions in the group. It's a great group. It's our own app and we're happy to have you guys on there.

David Wiener: Fantastic. That's great. And once you understand the strategy and you're either under contract or already own a short term rental, that's where my team comes in. If want to see what short-term rental and a cost segregation actually looks like on your property, go to taxstrategyplaybook.com and subscribe to the newsletter. I've got some materials on there, some free resources available just for the subscribers to our newsletter. And you'll be able to contact me through that to see an estimated first-year deduction on your property and a simple side-by-side of with cost segregation versus without cost segregation. So you can take it back to your tax strategist and you can know if it's worth doing or not. So if this has been helpful to you, make sure you're subscribed to the Tax Strategy Playbook so you don't miss any upcoming deep dives on research and development at 179D and more ways to keep the money that you're already making. Ryan, thanks again for hanging out with us. This was fun very informative. For everybody listening, go take action on at least one thing from today's episode. Just don't let the IRS keep the extra. Thanks, Ryan. All right, we will talk again. I'm going to have you back for something. this was fun. I appreciate it.

Ryan Bakke, CPA: Awesome. Thank you so much. You're welcome. Thank you so much.