system
A chat on subreddit /r/wallstreetbets
human
you pay income tax on the net rental income as well.  


The first $40k-ish of qualified dividend income is tax-free, and then it would be 15% until $300k-ish, and then 20% cap from there.

Qualified dividends could potentially drastically reduce his tax burden.

Remember, 1031 is only tax deferral on the \*proceeds\* of the sale, not any income previous.
gpt
Sure, that’s fine. We can play this game

Rental income offset by depreciation for 27.5 years. Want to add to that timeline? Make a capital expense - update something, add square footage, add a window, etc. increase your income and increase your depreciation expense. Etc. if you are fine at estate planning you can have a low effective tax rate


Yes, you would pay income on the revenue. But you’ve just sheltered the income of one to be tax free with the 1031. As a result, you’ve increased your basis into the new property so your mortgage is lower, but you’ve just reset your 27.5 year depreciation schedule. You’ve increased your cash flow with your lower payment amount with potential to further decrease your tax liability with the depreciation schedule. If you are worried about paying taxes while exiting a cash flowing asset, you’re doing something right. 

Real estate is a just fine and safe way for this guy to make cash flow while still building equity which you can’t just discount because you may pay tax on the sale. You can borrow against the value of real estate a lot easier and cheaper than you can the value of your brokerage account.

Real estate is a gang buster way to make money. All the boomers figured it out and mortally abused the fuck out of it and brought on 08, which scarred an entire generation of people, which is a shame because it’s safer than ever after the lending reforms from 08 while still maintaining all of the advantageous tax benefits. 

Can’t speak to what it means to own a real estate asset in Topeka, KS but there’s a reason real estate in large metro areas can make a lot of people a lot of money.