Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. For personalized guidance based on your specific financial situation, please consult with a licensed tax professional or certified public accountant (CPA).
Thinking about turning your Tracy, CA home into a rental property? Or maybe you're considering buying an investment property in the Central Valley?
Real estate can be one of the most powerful tools for building long-term wealth—and smart investors know it’s not just about rental income. Strategic tax advantages can also play a major role in your return on investment.
In this guide, we’ll show how buying a $500,000 property and renting it out can save you thousands on taxes, especially when you leverage advanced strategies like depreciation, cost segregation, and bonus depreciation.
These are key tax benefits every California landlord should understand—whether you’re a first-time investor or growing your portfolio in Tracy and beyond.
Step 1: Rent Out the Property
You list the home for rent. Once a resident moves in, your property becomes a rental and qualifies for several tax benefits.
Step 2: Claim Depreciation
The IRS lets you reduce your taxable income by accounting for the wear and tear on your home. This is called depreciation. Usually, this benefit is spread out over 27.5 years. But there’s a way to access more of those tax savings upfront.
Step 3: Use Bonus Depreciation and Cost Segregation
With a cost segregation study, a specialist separates the components of your home, like flooring, appliances, and roofing. These items can be depreciated faster. Using bonus depreciation, you can take a large portion of that depreciation in the first year.
For a $500,000 home, this might create $150,000 in paper losses in year one If you’re in a 37% tax bracket, that could reduce your tax bill by around $55,000 These are paper losses only. You’re not losing real money, but you are reducing how much of your income is taxed.
Step 4: Keep More of Your Income
If you made $200,000 this year, you might normally owe about $55,000 in federal taxes. With the $150,000 depreciation applied, your taxable income drops. You might only owe around $5,000 instead.
That means you keep about $50,000 more in your pocket.
Step 5: Let Your Investment Grow
While saving on taxes, your property is also:
Increasing in value
Paying down the mortgage
Generating monthly rent income
This is how real estate builds wealth over time.
Turn Tax Savings Into Long-Term Wealth with HBR Rentals
The numbers don’t lie—real estate investing offers more than just passive income. With the right strategy, your rental property can work double-time by reducing your tax burden and growing your long-term equity. But tax savings only come with proper planning, and property performance hinges on reliable day-to-day management.
At HBR Rentals, we help Tracy, CA landlords maximize their returns while minimizing stress. From securing qualified residents to tracking expenses and ensuring legal compliance, our team handles it all—so you can enjoy the financial rewards without the daily grind.
Ready to put your investment property to work? Contact HBR Rentals today to learn how our full-service property management solutions can help you earn more, save more, and build lasting wealth.
