Questions we are asked most

Yes, and that is who most of this is built for. The common advice to a high-income employee is to max out the 401(k) and stop, because most of the tax code's incentives are written for investors and business owners. The strategies here work by making you one. Short-term rental property and equipment leasing both produce deductions that can apply against active income, provided the material participation rules are met.

No. That is a common misconception. The material participation rules include a test of at least 100 hours where no other individual spends more time on the activity than you. For a married couple filing jointly, that can be met with 50 hours each. The relevant reference is Treas. Reg. 1.469-1T(e)(3)(ii)(A). Confirm your own position with your CPA, because many accountants have not worked through these specific rules.

Because of what you are actually doing. A long-term rental is passive: in a good month the tenant pays and you hear nothing. Passive losses generally offset passive income only, so the depreciation cannot reach a salary. Where the average guest stay is seven days or less, the activity falls under the same treatment as a hotel, since you are checking guests in and out continuously. People call this the short-term rental loophole. It is not a loophole, it is the category the activity belongs to.

The One Big Beautiful Bill Act restored 100 percent bonus depreciation and made it permanent. Bonus depreciation means taking the deduction in year one instead of spreading it across the asset's normal schedule. On equipment that is the full purchase price. On real estate it applies to the shorter-life components a cost segregation study identifies, not the whole building, and never to the land.

No. It is an engineering report that breaks a property into its 5, 7 and 15 year components, leaving the rest on the long schedule. People assume it is an aggressive position that invites scrutiny, but it is a standard study performed by engineers to established methodology. What it changes is timing, not the total amount you are entitled to deduct.

It is a short-term vacation rental, bought and run as an investment. The name is ours, not a tax term. We call it that because the deductions and the rental income are aimed at a specific job: covering college without taking the money out of your retirement. Physically it is an ordinary house in a market that supports nightly rental.

Our team sources the property, runs the market data for the revenue projection, handles the purchase and the ownership transition, manages any renovation, designs the interior, runs the guest experience and optimizes the nightly pricing. That is the part we built the team for. The part that cannot be handed over is material participation. If the depreciation is going to apply against your active income, you have to meet one of the participation tests yourself and be able to evidence it. Decide with your CPA how you will meet and document that before you buy, not after.

Selling triggers recapture on the depreciation you claimed. A 1031 exchange defers it when the proceeds go into more real estate, and that can be repeated. There is also the step-up in basis: beneficiaries inherit at current value, so if they sell, tax applies to the gain from when they inherited rather than from what you originally paid.

Most often from somewhere it is already sitting. Cash in the bank is the simplest, with no tax and no penalty. A 529 can be used, though beyond the qualified education expenses you pay tax and a 10 percent penalty on the gains. An IRA can be used too, and in a year with qualified education expenses the early distribution penalty does not apply before 59 and a half, although income tax does apply to all of it. The reason that can still make sense is that a deduction in the same year offsets the income the withdrawal creates, which settles the tax on money that had never been taxed. None of this should be decided without your CPA.

If the withdrawal is not used for a qualified education expense, the gains are taxed and there is a 10 percent penalty on the gains. Not on the whole balance, only on the growth. One alternative is using the money for private high school. Run the full calculation before moving anything, because the savings have to be worth the cost of getting there.

Not on its own. Your eligibility is the Cost of Attendance minus your Student Aid Index, which comes out of the FAFSA and CSS Profile. Lowering the SAI increases eligibility, but whether that becomes money depends on the school. Most schools using the CSS Profile will not accept business losses as a reduction. School choice is the single largest factor in what college actually costs.

It is the name of the fourth strategy, and of the book Lance wrote in 2018. The argument is that how you pay for college matters more than how much you pay. Selling or spending an asset stops it compounding and usually creates a tax bill, so the alternative is to hold the asset and borrow against it, since loans are not taxable income. Done that way college is paid for out of what your retirement earns rather than out of the retirement itself.

This is the question we hear most. Tax incentives come with rules, and the rules have to be followed. Nobody worries about an audit for claiming the solar credit or the electric vehicle credit, and these programs are the same kind of thing. We keep tax attorneys on retainer to review each program for compliance before we put it in front of a client, and your own CPA should review the details with you as well.

No. A CPA's core job is filing your return and keeping you compliant, and that work still needs doing. The gap is that most families meet their accountant after the tax year has already closed, when the decisions that mattered are behind them. It is also unrealistic to expect any one accountant to know every program that exists. Your CPA reviews the details and confirms you are compliant.

Yes. Property values can fall, a property can sit empty, and in a bad month the rent may not cover the mortgage and expenses. Financing increases both the return and the exposure. Short-term rental income also depends on local regulation, which can change, and on travel demand. Weigh these with your own advisors before buying anything.