How to Minimize Taxes on Real Estate Investments – Richard Maize Shares His Strategy
When people ask me what separates a good investor from a great one, I often say this: a good investor knows how to make money, but a great one knows how to keep it. One of the biggest drains on real estate profits is taxes—capital gains, depreciation recapture, and income taxes can eat into your returns if you’re not strategic.
Over the years, I’ve learned that minimizing taxes doesn’t mean cutting corners—it means planning ahead, understanding the law, and structuring your deals smartly. Here are some of the top strategies I use to protect my investments and preserve long-term wealth.
1. Take Advantage of 1031 Exchanges
A 1031 exchange allows you to defer capital gains taxes when you sell one investment property and reinvest the proceeds into another like-kind property. I’ve used this strategy to scale my portfolio without triggering tax liabilities. Timing and proper execution are key, so work closely with a qualified intermediary.
2. Use Depreciation to Your Advantage
One of the biggest perks of real estate is depreciation deductions. Even though your property might be appreciating in value, the IRS allows you to deduct a portion of the asset’s cost every year. This can significantly offset your rental income and reduce your taxable earnings. Just be mindful of depreciation recapture if you sell.
3. Consider Cost Segregation Studies
For larger properties, I recommend looking into a cost segregation study. This strategy breaks down property components—like fixtures, appliances, and land improvements—allowing you to accelerate depreciation and claim larger deductions earlier. It’s especially powerful for high-income investors.
4. Invest Through LLCs or Partnerships
Owning properties through LLCs or limited partnerships not only offers liability protection but also provides more flexibility in how your income is taxed. In many cases, you can pass income and losses through to your personal return and take advantage of various deductions.
5. Offset Gains With Losses
If you’re selling an investment at a gain, look at other assets in your portfolio that may have underperformed. Harvesting losses to offset your gains can reduce your taxable liability. This works across asset classes, not just real estate.
6. Stay Informed on Tax Law Changes
Real estate tax law is constantly evolving. Whether it’s new bonus depreciation rules or changes to capital gains rates, staying informed is non-negotiable. I make a point to review my tax strategy with my CPA every quarter—not just at year-end.
Final Thoughts from Richard Maize
At the end of the day, real estate isn’t just about buying low and selling high. It’s about playing the long game—understanding the tax implications of every deal and setting yourself up to keep more of what you earn. If you want to build real wealth, minimizing taxes isn’t optional. It’s essential.
–– Richard Maize
