Example of how to pay no taxes and build wealth

Sadly enough this does not get taught in school and most people wrongly assume they can't do this. But I'm going to use one of my actual propertied for numbers.

My primary household income was about $150k. 3 years ago we bought a $500k (20% down) rental property, and spent $20k converting/furnishing a couple rooms to bedrooms making it a total of 7 bedrooms.

We rented out each room and after expenses we net about $2200 a month (about $26k a year). Obviously this is a true side gig and not for everyone, but that's a separate conversation.

My wife furnished the property, manages the landscape and cleaning, logs our expenses, and does showings when a room is available. The goal of for her to work 750hrs and 51% of her working time dealing with our real estate which qualifies her as a real estate professional in the IRS rules.

Come tax time our income is now about $176k, which typically means we would be paying $30k in taxes. However, real estate allows you the ability to take depreciation on the property to offset some of your income. And if you accelerate through a cost segregation analysis (cost of $3k), you can take off much more.

Well we did that, as well as taking the income from the property and each month IRAs and an HSA which is invested into index funds earning 10-12%. Between the depreciation and contributions it dropped our adjusted gross income to $90k. And with the standard deduction and child tax credits, we essentially paid no taxes.

All the while the property went up $50k in value, the index funds went to 20%, the mortgage rate was 3% so we paid off about $8k of the mortgage and we used our tax refund and excess cashflow to fund another property the following year to rinse and repeat.

Calculating the IRR on that purchase we spent $120k which turned into an extra $50k in equity, $26k in cashflow, an extra $4k in growth from the index funds, $8k in mortgage pay down, and probably $15k in tax deductions, which is a return of 85% after one year.

I hope more people just learn these basic strategies to improve their own situations.