re: Should I incorporate my 1099 income?

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I’m about 99% positive that the firm you mentioned for the investment can only help you offset passive income, and obviously that depreciation doesn’t forever. Keep us posted on how the new investment “helps”.

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There is something we are not being told.

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Also, since you earned the residuals as an individual, will your old client be open to paying the corporation. How long will you receive the residual pay and will it decline over time?

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The old client will pay the residuals to wherever I designate.

The residuals are "vested", so they are paid until all of the policies lapse. Conservatively, I can expect the residual payout to decline around 3-6% per year. I do need to double check to see if the residuals still get paid to my beneficiaries if I die. They did when I was still an active agent, not sure if that's still the case.

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Appears I'm stuck with the SE tax no matter what.

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I’m not so sure about that. If you work 40hrs per week at a W2, your “reasonable” salary would be less than full time for these residuals. You can have a study done (most CPAs can get this done for you) of what is reasonable and put yourself that.

I will say that $50k starts to get into the territory of not worth it for S Corps. But every situation is different, definitely talk with someone about this

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All I know is the way it was explained to me is that the real estate partnership would help save me taxes on 1099 income and that appears to have happened last year.

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Again, that only works if the real estate partnership losses aren't passive. Where the losses come from (bonus depreciation, operations, whatever) doesn't matter.

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“The rules allow Bonus Depreciation to 100% for all qualified purchases made between September 27, 2017 and January 1, 2023. Bonus Depreciation now ramps down to 80%, starting in 2023. Bonus depreciation will continue to ramp down for ensuing years: 60% for 2024, 40% for 2025, 20% for 2026, and 0% beginning in 2027.“

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No real estate purchase qualifies for 100 percent depreciation on the entire purchase. You can certainly do a cost segregation study and get building components into the bonus category, but a portion won't be, not to mention, land isn't depreciable at all (land improvements are, but not raw land).

Either your CPA is doing some shady stuff, you are doing some shady stuff, or there is a miscommunication somewhere along the line. I'm not trying to be mean, but you are giving advice and telling someone to do something, when you clearly admit "I'm not a tax expert".

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Appears I'm stuck with the SE tax no matter what.

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An S Corp helps to avoid that to the extent you can take some profit allocations that are in addition to salary.

The issue becomes, for many self employed individals, a reasonable salary is pretty close to the net income before owner compensation. So you aren't savings much, if it all, while having to deal with the additional compliance and tax restrictions borne by an S Corp.

On the other hand, many people with an S Corp roll the dice with an unreasonable salary, and the reality is many people get away with it.

I’m sorry. I didn’t know I had stumbled on to OnlyCPAs. I thought it was a board were people could generally talk about money related topics. Why don’t you talk to Omar Khan at Boardwalk yourself. I’m sure he’d be surprised to know that his entire business model he’s been running successfully for years doesn’t work at all according to you. He usually responds quickly.

Or a LLC...have the Corp hire you as a consultant or whatever

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Seems to me like you are the ones who don't know what you are talking about fully.

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, sure.

This is black and white stuff from a legality standpoint. If you, Omar, and your CPA want to blur the lines, that’s a different story, but you unequivocally cannot deduct real estate losses against most types of 1099 income outside of two exceptions - your income is below the phaseout limit for the annual rental loss allowance (which it doesn’t sound like yours is anywhere close), or you’re a real estate professional. That’s it. That’s the two options.

Look, many higher income self employed folks understandably do whatever they can to lower their tax liability, including coloring outside of the lines. Conservation easements were a very popular option for a while until the IRS started to blow them up and come after everyone that was abusing the rules. In that same vein, many of these real estate partnerships sell the real estate professional status as something your spouse can easily obtain while you run your dental practice and save you both a ton of money, but they’re an audit away from a big problem.

Investing in real estate has legitimate tax friendly features , that is a fact, but what you’ve described in this thread is not one of them.

Your Boardwalk Wealth investment could have a loss that allowed you to offset your other rental income, but that’s it. Plain and simple.

Here is a straightforward breakdown from another real estate GP firm

I just want to say I appreciate your engagement on the topic. There is/was clearly something missing from the original set up because it simply wouldn’t work as you originally described without more details. The silent partnership may be the missing piece of the puzzle.