Taxes- we like to pay them right!??
Nooooo? Keep them away from us!
Well how about tax SAVINGS?
I think that sounds more like it!
Did you know that real estate provides you with another huge benefit? TAX SAVINGS!
Yup I said it, but now you want to know how?
Here goes 👇🏽👇🏽👇🏽
I played kick the can as a kid. Ironically enough the goal of the game is to put the players in jail. Well I assume you are like me and want to play kick the can legally.
1️⃣ 1031 𝐄𝐱𝐜𝐡𝐚𝐧𝐠𝐞- this is when an investor can continue to defer their taxes (legally) by reinvesting their gains into other similar asset classes to defer the potential tax liabilities you’d receive if you were to sell and take the cash. You can kick the can (er’ asset) down by rolling your proceeds into 1031 exchanges, thereby resulting in large tax savings until you well...kick the bucket. 🤫
2️⃣ 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐨𝐩𝐞𝐫𝐚𝐭𝐢𝐨𝐧𝐬? Yup gotcha covered!
Business expenses such as mortgage interest, maintenance costs, insurance and property taxes on your properties etc can be deducted which lowers your income and therefore tax liability.
Ahhh and lastly, the good ol’ cost seg.
3️⃣ A 𝐜𝐨𝐬𝐭 𝐬𝐞𝐠𝐫𝐞𝐠𝐚𝐭𝐢𝐨𝐧 at a high level is when you accelerate the depreciation of an asset in year 1, instead of waiting the 27.5-39 years of straight line to do so. (side note: the government has changed the rules around this one so 2022 is the last year to claim 100% depreciation in the first year. It'll start to phase out in 20% increments but fear not! There's still a ton of incentives.)
For each investor on the investment, they also receive their share in tax savings proportionate to their deal ownership.
And bonus depreciation essentially accelerates this process even further sometimes amounting to 75-100% of depreciation expense in year 1.
I hope this made tax savings fun!
Disclaimer: I am not a tax professional, nor lawyer…this is for informational purposes only. I’d advise on consulting your tax professional or CPA on how this affects your situation.