How to Use Real Estate Depreciation When Cashing Out an IRA to Offset Taxes

A caller asked what he should do to offset the tax penalty if he withdrew his $100,000 IRA. Del described how to use depreciation to reduce the tax burden as much as possible

“What I tell people to do is to pull your IRA money out early in the year… January, February, March… something like that so you have a whole year’s worth of depreciation to take against it. Second, buy yourself as large a property as you can, as leveraged as you can, so you are going to have a lot of real estate to depreciate. Third, I would use something called “cost segregation”. Cost segregation is going to double, if not triple, the amount of deductions you can take…”


  1. This is one of the most least understood and most important topics in real estate investing.

    The ability to not only offset your real estate gains but to potentially offset other income with real estate depreciation is very powerful.

  2. Can you forward to me the specific tax code that allows depreciation of rental property to offset cashing out of an IRA?

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