By David Duch, Former IRS Revenue Agent & Special Agent | Enrolled Agent
Founder, Ascension Tax Solutions
If you’ve spent any time online, especially on TikTok, Instagram, or YouTube, you’ve probably heard people talk about tax “loopholes.” And if you follow real estate investors or financial influencers, you’ve definitely heard about so-called loopholes involving short-term rentals, real estate professional status, depreciation, or cost segregation.
Let me say this clearly:
I hate the word “loophole.”
Not just because it’s overused — but because it’s deeply misleading.
The strategies people refer to as “loopholes” aren’t tricks.
They aren’t sneaky.
They aren’t accidents.
And they aren’t things the IRS “doesn’t want you to know.”
Most importantly:
Real estate isn’t a loophole.
It’s policy.
It’s strategy.
It’s the law — exactly as Congress intended.
Why People Think Real Estate Is Full of Loopholes
The truth is simple: the U.S. tax code is intentionally designed to reward activities that grow the economy, and real estate is one of the biggest economic engines we have.
That’s why Congress includes so many incentives for:
- property ownership
- housing development
- long-term investment
- risk-taking and building equity
- job creation through construction and property management
- revitalization of communities
Real estate tax benefits aren’t “mistakes.”
They are economic policy tools.
But here’s the real issue:
Most tax information online comes from marketers, influencers, or people who don’t understand the law.
So when they see something complicated — like bonus depreciation or STR classification — they label it a “cheat code.”
It isn’t.
It’s a legal framework with very specific rules, and if you meet those rules, you qualify. If you don’t, you don’t.
Simple in theory.
Misunderstood in practice.
Where the STR & REP Confusion Really Comes From
Two real estate tax concepts create more misunderstanding than any others:
- Short-Term Rentals (STRs)
- Real Estate Professional Status (REPS)
Online, these get marketed as magic:
“Turn your W-2 income tax-free!”
“Pay $0 taxes with this little loophole!”
But here’s what those creators don’t tell you:
- Each strategy has strict qualification tests
- The IRS scrutinizes these positions closely, especially in examinations involving real estate losses
- Most taxpayers — and many tax preparers — misapply the rules
- You must keep real documentation to substantiate your claims
- Incorrect usage leads to expensive adjustments, interest, and penalties
I’ve been on both sides of this — as a former IRS Revenue Agent and former Special Agent — and I’ve watched this play out dozens of times.
The conversation usually goes like this:
Taxpayer: “My CPA said I qualified.”
CPA: “I explained the rules.”
IRS: “Show me your logs.”
And when the records don’t exist?
The IRS adjusts the return, assesses interest, and imposes penalties.
It’s no different than speeding.
You might get away with it — until the moment you don’t.
And when you get caught, the law applies exactly as written.
Why So Many People Get This Wrong
Many practitioners explain the outcome of these strategies (“You can deduct losses!”) without explaining the responsibilities behind them.
They skip over:
- the hours tests
- material participation
- contemporaneous logs
- aggregation rules
- annual qualification requirements
- documentation required to defend the position in an audit
- what happens if circumstances change mid-year
- the difference between passive and non-passive income
- how cost segregation interacts with real estate grouping elections
They promise the benefit — but not the roadmap.
They talk about the deduction — but not the proof.
And taxpayers assume their preparer “handled everything,” when in reality the preparer assumed the taxpayer understood the rules.
That disconnect is exactly where IRS problems begin.
Where Ascension Tax Solutions Is Different
My approach comes directly from my years inside the IRS.
I don’t talk in loopholes, gimmicks, secrets, or shortcuts.
I talk in law, regulations, tests, and strategy.
Because I know exactly how the IRS:
- evaluates a tax position
- reviews how you’ve classified and reported your STR activity
- tests REPS qualification
- determines material participation
- applies the tax code to real-world facts
- requests documentation
- decides whether an audit adjustment is warranted
That insight matters — and it’s rare.
So when I build a strategy with you, I don’t just tell you what is possible.
I show you:
- how it works
- why it works
- what the IRS looks for
- what records protect you
- how to stay compliant
- what red flags to avoid
- how to use the tax code the right way
You get the benefit without the blind spots.
You get strategy without risk disguised as opportunity.
Real Estate Isn’t a Loophole — It’s a Foundation for Wealth
Here’s the truth:
Real estate is one of the most powerful, intentional wealth-building tools built into the U.S. tax code.
But like any powerful tool, it must be used correctly.
A good strategy protects you.
A sloppy one exposes you.
A misunderstood one costs you.
A misapplied one raises your audit and adjustment risk.
The difference comes down to three things:
- Understanding the law
- Applying it correctly
- Keeping the documentation that defends your position
Most people never get that full picture.
But you can.
With guidance from someone who spent more than a decade inside the IRS — and now uses that experience to help taxpayers — you can use real estate strategies the way Congress intended:
To build wealth, reduce your tax liability, and stay compliant every step of the way.
