We work with a couple where one spouse has real estate professional status (REPS) and they’re on track to earn over $5M of ordinary income this year.

If we only focused on investing their portfolio in a vacuum, we’d miss the biggest lever available to them:

reduce their income taxes!

They are diversified across multiple tax-aware hedge funds that lower the equity risk of the portfolio and potentially realize deductions that can offset a portion of their income.

But with REPS, we can do even better.

In their case, we’re investing in specific real estate deals with large depreciation benefits.

On roughly $1m invested, they are projected to receive around $1.7m of deductions that can be used against their income because one spouse qualifies as a REP.

The goal isn’t just “own some real estate and some hedge funds.”

It’s to line up:

• Which dollars are exposed to ordinary income
• Which structures can legally create losses or deductions
• And how quickly we can recycle those tax savings back into compounding assets

For a couple earning $5M+ of ordinary income, reducing that tax drag can have a bigger impact on long‑term net worth than trying to squeeze a little extra return out of a traditional 60/40 portfolio.

Two couples with the same net worth but different tax status should not have the same portfolio. Their available tools, constraints, and opportunities are completely different.

This example is for illustration only, not tax, legal, or investment advice. Strategies like this are complex, come with risks, and have to be coordinated with a qualified CPA and, often, an attorney.

But if you (or your spouse) have real estate professional status and high ordinary income, and your portfolio looks like a standard off‑the‑shelf mix of funds, there’s a good chance your investments and your tax situation are not talking to each other.

That’s usually where the real opportunity is.