When you purchase real estate you can divide the title between the land and the building. The building would be in your name, but the land would be in the name of a trust for your children. You would then lease back the property from the trust. The result is that you can depreciate the building and can get a deduction for the land in the form of ground rent. Thus, you are now effectively able to deduct 100% of your purchase price. Even if you already own some rental property, you can accomplish this. Just transfer the title to the underlying land to a trust set up for your children. You would then pay ground rent to the trust.
Specific Details
The parents reduced their taxable income by $5,000 by deducting 100% of their real estate, including the land. Since the parents income was taxed at the 30% tax bracket, the income reduction may decrease their income taxes by $1,500 ($5,000 x 30%).
Potential Savings
If you are in a combined (federal, self-employment, and state) tax bracket of 30%, you could reduce your taxes up to $300 for every $1,000 of income reduction by deducting 100% of your real estate, including the land.