High W-2 Earner Using Long-Term Rentals, Form 3115 Catch-Up, and Depreciation Timing
$318,900
Estimated Annual Tax Reduction
34.2% → 21.9%
Estimated Effective Federal Tax Rate
$1,470,000
Total Annual Income
Client Profile
Medical professional with high W-2 income and a portfolio of long-term rentals acquired over several years.
W-2 income: $1,050,000
Rental income: $420,000
Core Strategy
Recovering missed depreciation through accounting method changes.
Implementation Highlights
• Portfolio-wide depreciation review
• Cost segregation on two properties
• Form 3115 catch-up for prior-year missed depreciation
Key Results
Missed depreciation identified: $510,000
Accelerated current-year depreciation: $285,000
Total deductions applied against high-rate income.
Outcome
Combined depreciation reduced current-year taxable income enough to lower federal tax liability by approximately $318,900.
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