A W-2 employee explains how he used real estate to reduce federal taxes on his $300,000 salary by 99% — plus a 2-step process to qualify for the deductible
In 2022, Michael Hyun earned about $300,000 as a software engineer in California. Eileen, his spouse, made an additional $122,000 as an independent contractor.
However, their big income year also meant a big tax year. As a couple, they planned to file their taxes jointly and realized that they were in the third-highest federal tax bracket, at 32%.
Being a California resident, Michael also had high state taxes. He felt terrible after realizing how much money was deducted, he said. So, he began scouring the internet for alternative ways to reduce his taxes but quickly realized that options for W-2 earners were limited.
That same year, he came across a YouTube video that explained how real estate can be used to substantially reduce taxable income on a W-2. Michael decided to hire a tax strategist who could give him proactive suggestions. The strategist cost him $2,500 but saved him big in taxes.
Michael already owned a single-family home in the Bay Area that he purchased in 2021 for $960,000. It was an investment property that generated rental income. In September 2022, he bought another single-family house for $900,000, according to property records viewed by Business Insider.
