How Dr. D Used Cost Segregation on a Duplex to Eliminate $72K in Taxes
By purchasing a long-term duplex and strategically claiming Real Estate Professional Status, Dr. Block turned passive depreciation into $72,000 of tax savings — while continuing his clinical schedule.
overview
Dr. Block is a full-time anesthesiologist earning just under $600K per year. He was tired of “doing everything right” — maxing retirement accounts, investing in index funds — and still getting crushed by taxes. Instead of chasing another side hustle, he bought a long-term duplex and implemented a cost segregation strategy. By planning ahead and restructuring their time, they unlocked over $ 70,000 in tax savings legally.
Challenge
Despite earning a top 1% income, Dr. Block felt stuck. His CPA offered cookie-cutter advice, and every April came with another six-figure tax bill.
He’d heard whispers of "bonus depreciation" and “real estate professional status,” but assumed it was only for full-time investors.
The real breakthrough came when his CPA told him:
“If your spouse meets the Real Estate Professional criteria, you both benefit.”
Solution
Dr. Block purchased a duplex in a high-demand rental area, with one unit already occupied and the other in need of light renovation.
He and his spouse formed an LLC and kept records to materially participate in managing the property.
His wife — who had recently stepped back from clinical work — tracked her hours and qualified for Real Estate Professional Status under IRS rules.
They then commissioned a cost segregation study, which created accelerated depreciation deductions totaling nearly $140,000.
Because of REPS, these losses were used to offset Dr. Block’s active W2 income.
Result
$72,000 in taxes eliminated that year Duplex appreciated by 8% within 12 months CPA restructured future returns to build on this strategy They’re now planning a 1031 exchange to roll gains into a larger property Inspired several of Dr. Block’s physician colleagues to explore LTRs + REPS |
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