Welcome to the Purpose Driven Investor, where we build more than portfolios, we build communities. I'm your host, Robert Howell, a real estate investor and founder of Define Communities. Each week, we'll explore how purpose and profit connect through affordable housing, land home packages, and impact-driven investing. If you're a lender, land seller, or a partner who believes money should move with meaning, you're in the right place. Hey, everyone, welcome back to the Purpose Driven Investor podcast. I'm your host, Robert. And today's episode is a must listen for anyone that wants to build wealth through real estate and a business or a business, really, who wants to keep more of what they earn. So today our guest is CJ and he is a CPA out of Florida and owns a boutique accounting firm that specializes in tax planning and compliance for real estate investors, business owners and high income professionals. He spent a decade working at top CPA firms and then recently in the last few years started his own firm where he can focus on strategy with clients. His work is centered around helping clients proactively structure their business and also their real estate portfolios to legally minimize taxes and build long-term wealth. So join us today as we talk about real tax planning, common mistakes investors make, and how CPA should actually support real estate entrepreneurs. So let's jump into this. And this is my conversation with CJ. So CJ, Thanks so much, Robert. Excited to be here. Hope to share some valuable insights from the tax planning side and excited All right, awesome. Well, hey, CJ, let's start first with your background and kind of your path to specializing in real estate. So tell us as we start, what Yeah, so what led me originally is I actually took an accounting class in high school, and I just clicked really well with, with my approach to things so a lot of people have the misconception that you oh you must be good at math, while I was lean towards being pretty good at math. It's also a lot of critical thinking, right? It's being able to take someone's situation and apply, whether it be tax law or accounting specifics, and apply those concepts to someone's situation. So I've always really enjoyed Okay. Love that. That's an early start there, but it's Yeah. And then, uh, I just kind of gravitated towards that when it became time to figure out, Hey, what do I want to major in, in school? Uh, kind of had that insight of, Hey, accounting might be a good fit. Uh, also a, uh, stable career. So I had my first, uh, uh, child pretty young too. So it was a big need for me to kind of jump in, find a stable career. Uh, and so that that's also the other side of it. Uh, but. Then went through college, got my master's, did an internship with a big CPA firm, and that's where it started. First couple of years started as a generalist. Like most CPAs, you just learn the basics and the foundations and get some hands-on working experience. Then from there, I found a firm that was really specialized in real estate. Um, and I joined them and just kind of kept rising Yeah, that's great. What drew you to that firm? That was my next question actually is kind of how you, how you took kind of that generous approach and Yeah, so what drew me to that firm originally was a couple of colleagues and people in my network had mentioned that firm to me and then just met with them and they were very just entrepreneurial driven, which was a little bit different from some of the bigger corporate focused firms that I was with where one, personally, you could rise through the ranks a little faster given the effort and inputs that you're putting in. And then also, hey, our clients are like that. So we work with a lot of entrepreneurial clients and really cool real estate investor type clients. So I found that to be exciting, jumped in and got working All right. That's awesome. So you worked at that firm for a bit and then you decided to launch your own firm. Tell me, tell us about why'd you decide to launch your own firm and really go out on your own and help real estate investors or entrepreneurs that Yeah, so for a few reasons, right? So I for a decade was putting in a lot of time. My whole goal was I am going to do whatever I can to make partner at one of these big firms, kind of head down, outwork anyone I can. And that got me far for a while. But what I started to realize is that big picture, I started to look at what is some of these partners lives look like? Did that align really what I wanted to have? Started to have I have three kids now, so a couple of young kids and just kind of looking big picture legacy and just from a time element. Right. And that gave me the idea of, hey, if I spend the same amount of time that I'm putting in at these firms, what could I build on my own? So that's really what drove me to that. And it's been a really exciting journey over the last couple of years. That's awesome. So how are your kids? So I have a 12-year-old, a three-year-old, and a one-year-old. And my wife is actually, we're expecting again, so fourth one on the way. So Is that the goal? Every couple of years, trying to get that extra tax deduction. It's a risky game, though. I don't know if it equals out. I think they're a lot more costly than that Probably true. Probably true. All right. So let's talk a bit about tax prep versus tax planning. And, you know, I think there's a big difference there. Right. And I think there's there's a lot of people that really are just doing tax prep and not really tax planning. Can you talk a bit about, you know, if we talk about tax planning, what, in your opinion, in your experience, what's the biggest misunderstanding that client, whether you're your clients or maybe other people's clients have Yeah, so we see this misconception a lot right so I think there's a lot of frustration with certain people that they feel like they're not getting proactive guidance that they're not, you know, the opportunities are not being presented to them that they're missing out on on opportunities right and while that's probably the case. it is important to know that largely those are going to be two different services, right? Planning, consulting, strategy versus like just a preparation firm. And one, make sure you're working with a firm that has the knowledge that you need and offers planning, right? So planning is more so what it looks like with our clients is we're meeting throughout the year. We're having two to three to four phone calls depending on what is going on with a specific client throughout the year. Our goal is to figure out what are the levers we can pull from a tax perspective to make sure that you take advantage of any opportunity, whether that be entity structure or specific transactions. Whereas preparation is really just taking what happened and reporting that correctly on the tax return. It's also a really important need to make sure you have a good preparer, right? Because you don't want to file things that are inaccurate, or especially if you're working in real estate, some of that reporting can be nuanced and complicated. So I think there's also, it's been a little bit undersold as the importance of a preparer. Uh, really what you need is, is for most people, both of those facets and someone who really understands your situation and can help you apply the tax law specifically to you instead of just like Love that. I think that's, that's important too. And, um, you know, it's not something I've, you know, think about tax prep. And for me, I'm like, wow, that's just, that's part of it, but it's not really that important. But what you're saying is actually tax Yeah, because if you think about it, a lot of times the planning that we do, right. Is the end deliverable is the tax return, right? So it's very important that, uh, down to what schedules are included with the return, the right questions selected the right elections that go along with it without getting too much in the weeds, right? Uh, the planning could be minimized if the end deliverable is not prepared correctly. Right. So that's why I kind of goes hand in Yeah, I love that. OK, cool. What's the you mentioned in tax planning? You're meeting several times throughout the year. Is there a let's say, quote, right So I think it's being as proactive as you possibly can, right? So with our clients, typically what we do is pretty thorough on the front end, right? We'll meet with you, make sure we're a good fit and what you need aligns with what we can provide. And once we kind of get through that discovery part, then we'll have a really deep dive initial call to just figure out, hey, holistically, what do you have going on? And what are the considerations? What are the levers that we can pull here? So a really deep dive initially, and then a year-end planning call, kind of the cycle that we're getting through right now is just before the year is over, Or is there anything that you should be doing to optimize your situation before it's too late? So those are like the key calls. And then outside of that, it's really just as needed. A lot of our clients have transactions going on throughout the year. So it's like, hey, can we jump on a call? and kind of go through that. So what I would say is at least you want to be doing this with the planning side with enough time before the end of the year to take advantage of any strategies within that calendar year. Got OK, that makes sense. And what what do you think investors should expect from a relationship with a CPA Yeah, so I would say you should expect responsive communication, we hear that a lot where that's not necessarily the case. You also should expect just them bringing opportunities to you that them being very knowledgeable on your situation, coming to calls prepared, being able to give you tailored guidance. If you're if you're having that type of relationship, I say you're working with someone that's That's pretty good and a good fit for you. Also, what we find too is that a lot of clients maybe have had a generalist CPA for a while and that's worked for them to a certain extent, but then it becomes a point in time where, hey, I'm doing more in real estate and it's kind of its own world when it comes to tax rules and laws. So it may make sense to, hey, do I need someone that's a little bit more real estate specific to really leverage That's good feedback. Sure. So let's talk about the common mistakes that are made by real estate investors or maybe entrepreneurs. What's the most common mistake So I'll give you a couple that kind of jump out, right? I would say another thing that's kind of undersold is the importance of bookkeeping and having accurate books and records and documentation because there's nothing worse than missing out on items that you actually paid for just because you didn't have them documented, right? So having a solid accounting system that you track everything and you're able to provide that to your CPA. Another thing is a lot of confusion around entity structures. To give one for real estate specifically is having rental properties in the wrong entity structure and knowing when to use an S-corporation versus not. That's a common question mistake that we see that can be challenging to correct. Those are a couple that Got it. Okay. You don't have to name any names here, but what's one thing that investors do Yeah, so I would say is just waiting for the last minute. I think a lot of, and it's due right, a lot of criticism goes on CPAs for, they're always scrambling last minute, they don't get back to me, they have too many clients. And for a lot, that's true, right? We personally try to manage our capacity really well to deliver great service. We have a lot of clients that waits the last minute too, and they're just scrambling to get us what we need to get their tax returns done or even some of the planning elements. It just puts us all out of bottleneck. If we can't get their tax return to you with well enough time for us to review it and just go through it in detail together, it could be diminishing planning as I like that. And, you know, a lot of what you're talking about, I feel like is after decisions have already been made. One thing I try to do is. not on every deal, but in some deals consult with my CPA before I make a decision. Can you talk about maybe an instance or an example where one of your clients have come to you before they purchased an asset or before they've sold an asset and said, Hey, what should I do here? And what kind of advice did you offer Yeah, that's a really good point. I would say that's really good best practice of before you make a decision, just run it by your CPA. Say, hey, I'm thinking about doing this. Any issues you foresee. I just had this example last week where a client of mine was getting ready to purchase a new property and just gave me a quick call and was, hey, I'm thinking about buying this property. I have an existing entity that I'm going to put that in. I was able to tell him, no, do not do that because here's why, right? It's what we're doing for that entity works really well, but it's not going to work great for this rental property you intend to buy and hold. So I think it's always good to run it by your CPA before because it's often can be more costly or a problem to fix after the Yeah, that's great. Is it okay for me to mix an LLC where I'm flipping properties, but I'm also holding properties from So generally, you don't want to mix activities. And the reason being is that Certain tax strategies or elections may make sense for one activity that don't make sense for the other. And it could be problematic to then later on bifurcate those two activities. So it's generally best practice to keep them separate. This way you can do what's advantageous to each without causing a problem with Love it. Love it. OK, that's good advice. All right. Let's talk about tax strategies that we should understand as real estate investors. Talk to me about when does cost segregation make sense in terms of the cost to do it versus the savings that could be allocated? When does it make sense for me to Yeah. Yeah. Good, good question. Something that we get a lot, especially now with the, uh, the updates of the tax law earlier this year and a hundred percent bonus depreciation kind of factoring into this whole thing. Right. So cost segregation is, is a really excellent tool to accelerate depreciation, uh, essentially to, to kind of give you a simple for those that may not be fully aware. Um, usually depreciation is captured over a long period of time. This cost segregation study helps push that up front with a large deduction in year one, right? So when would it make sense to do that? First kind of consideration is, are you going to benefit from the depreciation? This kind of gets into a whole other nuanced conversation of passive versus non-passive investors. So just without getting too much in the weeds, I'm happy to go through this in detail with anyone that may need help. If you are a passive investor, do you need passive losses? And therefore cost segregation would be a good tool. If you are indeed a real estate professional and your losses are non-passive, generally cost segregations are an excellent tool for that. And so first question is, can you benefit from the accelerated depreciation? given the cost that it's going to take to do it. And then another consideration that people might overlook is, is it a property that you intend to hold? If it's something that you're going to sell in the short term, you may want to think twice about doing a cost segregation study, because to keep it simply, there's this concept of depreciation recapture. And so if you turn around and sell in the short term, you may have some tax implications there that you'll then have to plan around that. A lot to unpack there, but hopefully that gives some insight as to what I That's great. Yeah. And you mentioned depreciation. Um, and you know, it's a good question around cost seg. And I guess that that's really the main benefit is accelerating that depreciation. As I think about depreciation and accelerating or not accelerating, How should I think about that long-term? Is it something where it's like, Hey, if I'm going to hold it for five years, then I should hold on. You know, I should do a cost seg or is there a point in time, which it kind of switched over, say, yeah, if you're going to hold it, do it. If you're going to sell it within five years, maybe don't do I think that's a pretty good rule of thumb is if you plan on, if you have a five year or more time horizon, I think it's pretty. a good two, and as long as everything checks out and you actually can benefit from the depreciation on your personal tax return, I think that's a good rule of thumb. And things change, right? So maybe you had the intent that you're going to hold on to it, And then for whatever reason you need to sell or it doesn't, things don't work out always how we anticipate. Um, there's always additional strategies that can be done, right? So there's always strategies for the strategies and it just requires proactive planning to see if you can, whatever you Got it. Okay. And last thing on depreciation and cost segregation. My understanding is that short-term rentals, and I don't own any short-term rentals, I own mobile home parts, but that short-term rentals actually are one of the better asset classes for cost It's not that it's necessarily more beneficial for cost segregation. It's kind of into my first consideration. It's just easier to benefit from the losses that a short term rental can provide versus other avenues of real estate. So I'll unpack that a little bit more. Right. So. In most cases for traditional real estate, you'll need to be a real estate professional, which comes with spending considerable amount of time in real estate activities and more time in real estate than any other activity that you do. So either you or a spouse needs to meet those criteria, right? Whereas short-term rental has its own kind of rule set where it's more of like an active business. So you're able to meet certain time elements much easier than you can with other forms of real estate. And therefore you're able to get those losses to be non-passive and so that they can offset other sources of active income. So you'll get a lot of high-income W-2 earners or high-income business owners that are buying the short-term rental. because it's generating losses that they can offset against those other sources of activity. And they're just able to do that a little bit easier than with other paths of real estate. Now, short-term rentals comes with its own nuances, right? It's that way because it is pretty active, right? You do need to manage that and self-manage to be able to meet Love it, man. It's almost like you knew my outline and knew what questions I was going to ask because my next set of questions around high income earners. So let's touch on that because I think a lot of the people that are listening are most likely high income or consider high income earners. What, what do you think that high income professionals and, um, how they approach tax planning and what, what should they do differently than maybe just the, the guy Yeah. So I think with high income earners, it's just the, the taxes you're paying, if you're to really look at it is, is steep, right? And the more you make, the higher you get into the marginal tax brackets and the more tax that you're subject to. So it's just, hey, what tax efficiency can I have? So a lot of the paths that we take clients down and help them with is, are they a high income earner and can your spouse spend some time and spend the time in real estate required to create this tax structure that would be really favorable, right, where you can go out and do some of the strategies we've talked about, cost segregation and accelerated depreciation. and have those losses combined with the other spouse's high-income W-2 or business. So that's one kind of pathway. And then the other is kind of in line with the short-term rental. So that's another common one where you buy the short-term rental and you self-manage, you meet the requirements, and now you're creating this really powerful loss that can offset this high income and That's great. So really, two main strategies that you recommend initially is the spouse engaging in more of a full-time real estate role to help with the W-2 earner, and then second, maybe short-term rentals. Are there any other strategies that are overlooked in terms of high-income earners reducing their tax? Yeah. So just, and also just to piggyback on that, it's also really important to structure this right. Uh, time tracking is a really key element, right? And if you were ever audited, those, those are the components that you're really going to need to be able to show is really clear documentation on how I met this, this time requirement. So I just want to throw that out there. Um, and then, you know, those are two that really like moved the needle, right. Uh, when we're talking about what, what can make a significant impact Then there's always home office deductions and mileage deductions, all of that, you know, kind of the more basic, you know, just tax elements to be, you know, having consideration, whereas like the cost segregation is kind of the more advanced play All right. So, um, name of the podcast here is purpose driven investor. And, you know, we like to focus on driving wealth and, and driving what we do around purpose. What do you, how, how does your purpose influence how you That's a really good question. So I am just really driven by being able to help my clients build wealth and playing a key role in that from the tax side. Right. So the more that you can save, the more in your pocket, the more reinvest. And a lot of my clients, they're approaching that from a legacy standpoint, right, where they're trying to build generational wealth and for their family. And that's the same path that I'm on. So I love being able to play a role in that from the tax planning and Man, I bet that's powerful. Yeah, you get to see it firsthand. Like, you know, I don't know how many clients you have, but imagine you just multiply and you can see it over and over again, how you can change people's life. That's that's really cool. Um, all right, so we're going to conclude here with a lightning round. Uh, so I've got five questions here and, um, just we'll go lightning fast here, but, uh, what's one tax One tax myth that I would kill forever. That's a really good question. Let's see. So I'll go back to bookkeeping, right? Bookkeeping is not important. It very much is. It's kind of the pillar. Without that, it delays everything and it diminishes your ability to do tax planning if Yep, that's huge. I made a mistake once I hired a overseas bookkeeper. Nothing, nothing wrong with overseas employees because I've got quite a few of them, but it took me. Nine months to clean up my books after that, because I didn't know anything about bookkeeping, I just trusted that that person knew about bookkeeping. All right. What's one strategy everyone should understand? So I think whether cost segregation is a good fit for you, I think you should be working with someone that can help break that down. If you're in real estate, it's really a significant and powerful strategy. So at a minimum, you should understand why it does or it doesn't work For a new investor, what I would say is one, make sure that before you do any damage with entity structure, that you can get some guidance on that. Set it up right from the start. And this way you don't have costly mistakes later on. It's too late once you own 20 properties It becomes very problematic. Yeah. All right. What's a So a habit is that I think they are proactive in their approach, right? So they know kind of like what you were saying, where you're, you're reaching out to your CPA before you do something. Uh, my clients after working with me for a while also understand the power in that. So, uh, just using your CPA as a strategic partner, right. Before you go down the road. just, hey, this is what I'm thinking about doing. Do you foresee any That's great. All right. Last lightning round question here. What does So purpose-driven investing, I think it's just being hyper-focused on what are your goals, being really focused on what are the inputs I need to do to reach my goals, and just having that align with your overall vision, right? So we talked a little bit about it. Mine is being able to build generational wealth for my family, being able to be a resource for other people in need, uh, from a bigger standpoint. So I think it's just being hyper-focused and driven on achieving Love it. All right, CJ. Hey, appreciate you joining today. Why don't you, uh, before we conclude, tell people how they can reach Yeah. So on socials, it's CJ the CPA. My name is Charles Tarantino. So you might see me there. I go by CJ. We put out a lot of content of things that we're working on with clients. So it could be a great resource for you to just follow. And then if you have a need or interest, we also do offer a free discovery call just to meet with you, get more insight as to what's going on, how we can help and just kind of talk through what that looks like in further detail. All right, that's great. Well, appreciate everybody listening today. If you're serious about real estate and building wealth the right way, go check CJ out and reach out to him. He'd love to connect and offer you that service. But CJ, appreciate you joining and we'll see you guys on the next episode. Thanks for listening to The Purpose Driven Investor. If today's episode sparked an idea or inspired you to make an impact, connect with me at howellandsons.com. Join our community of purpose-driven investors who are helping families find stable homes while building real returns. Because when