REAL ESTATE SCALING & WEALTH PRESERVATION
Strategic Tax Architecture for Austin Real Estate Portfolios
In the Austin real estate market, profitability is increasingly dictated by tax efficiency rather than simple asset appreciation. For sophisticated investors, the primary challenge is not just the acquisition of property, but the protection of liquidity against unnecessary tax drag. Millan + Co. provides the high level technical oversight required to navigate this landscape from the aggressive application of Cost Segregation to the multi generational benefits of 1031 Exchange mechanics. We act as the strategic architect for your portfolio, ensuring that your entity structure and tax strategy are engineered for Capital Velocity and long term wealth preservation.
The Scaling Path: Structural Efficiency
1. The S-Corp & PTE Inflection
As net income approaches the $100k threshold, we implement structural pivots to bypass the $10,000 SALT cap and mitigate self employment tax drag. This turns state level property tax burdens into fully deductible federal expenses.
2. Immediate Liquidity: 100% Bonus Depreciation
Through surgical Cost Segregation studies, we reclassify building components into shorter asset lives, front loading deductions to create immediate capital velocity for reinvestment.
| Dimension | Single-Member LLC | S-Corp Election |
|---|---|---|
| Self-Employment Tax | Applied to 100% of Net Earnings | Applied only to Reasonable Salary |
| Texas PTE Strategy | Subject to $10k SALT Cap | Entity-Level Federal Deduction |
Wealth Preservation Architecture
3. Qualified Opportunity Zones (QOZs)
Reinvest realized gains into a QOF within 180 days to defer taxes into the next tax cycle. Provides a permanent exclusion of gains on new investments held for 10 years.
4. Section 199A (QBID) Safe Harbor
We leverage the IRS 2019-38 safe harbor, ensuring portfolios meet the 250+ hour rental services requirement with records to defend against audits.
5. Debt Architecture & Basis Shielding (§ 465)
Sophisticated debt optimization ensures that at-risk rules and basis limitations do not restrict your ability to deduct depreciation driven losses.
6. Multi-State Nexus & Portfolio Decentralization
Mitigate tax drag for portfolios scaling beyond Austin. We manage complex filings in jurisdictions with disparate PTE rules or non-recognition of S-Corp status.
| Strategic Dimension | Strategic Scaling | Wealth Preservation |
|---|---|---|
| Key Focus | After-Tax Internal Rate of Return (IRR) | Estate Integrity and Basis Step-up |
| Mechanism | S-Corp and PTE Optimization | Family Limited Partnerships (FLP) |
| Primary Metric | Cash Flow Velocity | Net Asset Value (NAV) Defense |
Strategic Inquiries
How does the Texas PTE election help me?
It allows your business to pay state taxes at the entity level, effectively creating a full federal deduction that is not limited by the $10,000 SALT cap.
Can I perform a 1031 Exchange into a DST (Delaware Statutory Trust)?
Yes. This is a common exit strategy for investors looking to transition from active management to passive, institutional-grade holdings while maintaining tax deferral.
How does FIRPTA affect my sale as a foreign investor?
FIRPTA requires a significant withholding (typically 15%) on the gross sales price. We implement withholding certificates and treaty-based exemptions to minimize this immediate liquidity hit.
Can I use Cost Segregation on a residential rental?
Yes, though the ROI is typically highest for properties with a cost basis of $500k or more. We evaluate the depreciation acceleration potential to ensure the cash flow benefits outweigh the study costs.
What is the risk of claiming REPS?
The IRS frequently audits Real Estate Professional Status (REPS). We provide the rigorous documentation and time-logging protocols necessary to defend this status.