Three years ago, I’d have told you the best tax loopholes are in real estate. Today, I’ve changed my tune. In fact, I’ve got four reasons why business is a better deal when it comes to tax breaks than real estate is.
Three Reasons to Start a Business Today
Real Estate losses are limited against other income. If your income is over $150,000, the only way you could take a real estate loss against other income is if you were a Real Estate Professional.
(1) If you’re subject to Alternative Minimum Tax (AMT), the Real Estate Professional designation isn’t going to help.
NOTE: If you have a business, your business losses are fully deductible against your other income, no matter what.
(2) If you’re claiming Real Estate Professional status due to being a Real Estate Agent, the IRS might getting ready to audit you.
NOTE: One suggestion is to claim your necessary real estate activity hours come from activities with your own properties, not selling other people’s properties.
(3) If your strategy is to only have capital gains income (max of 15% tax under regular income tax), that all falls apart if you’re subject to AMT.
NOTE: The tax climate is changing. Don’t assume that what you knew about taxes three years ago is the same today.
And finally, my prediction for 2008: Look for still more changes!