irs' best kept secrets for real estate investors

21
Income tax liability is derived by multiplying taxable income by the applicable tax bracket rate. The lower the taxable income, the lower the rate, thus the lower the tax liability. Herein lies the secret to significant tax savings. The goal for tax planning is to reduce taxable income. That's the primary goal of all tax planning. Let's find out how this is accomplished.

Upload: rhroach1

Post on 23-Jun-2015

369 views

Category:

Documents


2 download

DESCRIPTION

Visit http://profitfromrealestaterightnow.reviews-4u.com// for more info

TRANSCRIPT

Page 1: IRS' Best Kept Secrets for Real Estate Investors

Income tax liability is derived by multiplying taxable income by the applicable tax bracket rate. The lower the

taxable income, the lower the rate, thus the lower the tax liability. Herein lies the secret to significant tax savings. The goal for tax planning is to reduce taxable income.

That's the primary goal of all tax planning. Let's find out how this is accomplished.

Page 2: IRS' Best Kept Secrets for Real Estate Investors

WAYS TO LOWER TAXABLE INCOME:

Page 3: IRS' Best Kept Secrets for Real Estate Investors

1. Spread income over time

Page 4: IRS' Best Kept Secrets for Real Estate Investors

2. Spread income to various entities

Page 5: IRS' Best Kept Secrets for Real Estate Investors

3. Group income and expenses

Page 6: IRS' Best Kept Secrets for Real Estate Investors

Knowing something about each of these concepts will permit you to intelligently implement a sound tax

program. With the assistance of a competent tax advisor, your tax savings will be significant.

Page 7: IRS' Best Kept Secrets for Real Estate Investors

Spreading Income Over Time

Page 8: IRS' Best Kept Secrets for Real Estate Investors

Real estate, especially mid-sized apartment buildings, provides the opportunity to spread income over several

years using the installment sales method of reporting. By accepting a relatively low down payment and spreading the principal payments over several years, total taxable

income for any one year is reduced.

Page 9: IRS' Best Kept Secrets for Real Estate Investors

In the tax-deferred exchange method, income can also be spread over time. Both methods can be structured to give

you maximum reporting flexibility.

Page 10: IRS' Best Kept Secrets for Real Estate Investors

Spreading Real Estate Income to Various Entities

Page 11: IRS' Best Kept Secrets for Real Estate Investors

Spreading income to various entities reduces the income any one entity has to report. By transferring ownership of

assets to corporations, partnerships, relatives, or trusts, an effective transfer of income can be accomplished as well.

Page 12: IRS' Best Kept Secrets for Real Estate Investors

Relatives in low-income brackets can be paid for services provided. As long as these services represent legitimate business transactions, spreading income in this manner

can save you thousands of tax dollars.

Page 13: IRS' Best Kept Secrets for Real Estate Investors

When operating entities have dissimilar tax reporting years and basis (cash or accrual), it's possible to spread

income and expenses over different years to take advantage of the tax laws.

Page 14: IRS' Best Kept Secrets for Real Estate Investors

Grouping Real Estate Income and Expenses

Page 15: IRS' Best Kept Secrets for Real Estate Investors

Grouping income and expenses can lower taxable income. Real estate provides the flexibility to implement this kind of tax planning tactic. Apartment building investments are a good example because they fit well within the definition of active participation rules (which allow a $25,000 write-off against salaries and other active income). This write-off

alone represents a substantial tax savings to many individual investors.

Page 16: IRS' Best Kept Secrets for Real Estate Investors

When changes in either income or expenses can be projected, the benefits of grouping are phenomenal. For

example, refinancing will create a higher interest expense deduction to offset anticipated increases in rental income. Short-term loan contracts with high points will accomplish

the same thing.

Page 17: IRS' Best Kept Secrets for Real Estate Investors

If expenses are projected to increase, offset them by increasing receipts from installment contracts. Avoid

reporting income when notes become due by renegotiating an extension of time. If the senior mortgage matures before your note, subordinate it to new financing

to extend the due date.

Page 18: IRS' Best Kept Secrets for Real Estate Investors

Investing in midsize apartments gives you the advantage of acquiring properties outside your hometown. As a

result, travel and transportation expenses related to your investments can be deducted. These deductions should be

timed to give you the maximum tax savings using the "grouping method." By rearranging the selling price and interest rate (within certain limitations), it is possible to

create either higher or lower interest and/or depreciation expense deductions.

Page 19: IRS' Best Kept Secrets for Real Estate Investors

Residential income capital gains and losses can also be grouped to maximum tax benefits. With restrictions, capital losses may be used to offset capital gains plus

additional amounts of ordinary income.

Page 20: IRS' Best Kept Secrets for Real Estate Investors

These represent only a few of the many techniques available. Always consult your tax advisor to assist you in making these moves. Understanding these concepts may

save you time and money.

Page 21: IRS' Best Kept Secrets for Real Estate Investors

http://profitfromrealestaterightnow.reviews-4u.com//