I received a nice letter from one of our USTaxAid readers, even though it was about why the person wasn’t going to sign up for coaching.
Some of it made sense, but there were also some other things that I saw that could be better.
Here’s what I received.
I would love to join your coaching class but I think it would have minimal value to my business because of the way I am currently structured. These tax strategies really favor full time business owners or real estate investors who can demonstrate that material participation in their real estate business and can be classified as a “real estate professional’ under the IRS code. When you have a W-2 income and a real estate business at the same time it is very difficult to quality as a real estate professional because more than half of your time during the year must be spent on real estate activities.
That’s absolutely correct. There isn’t a lot you can do as a W-2 employee when it comes to tax planning. It is true though, that a part-time business or side business can create huge tax breaks and it’s certainly worth the trouble to do something like that. You can build a separate stream of income in case something happens and you are downsized from your regular job. Get the learning curve over early! Plus, you’ll pick up tax breaks right away.
If you have real estate passive losses, I would take a look at that. First of all, if the property is cash flow negative it’s either a temporary condition that you’re working hard at fixing or it’s a bad investment. In fact, the word “investment” implies that there is some kind of return. In this case, there is none. The cash is flowing the wrong way!
If, on the other hand, you have cash you put in your pocket and the loss is merely a tax loss, then the best strategy is to stop depreciation. Suspended depreciation is added to basis when you sell (if you don’t use it in the ensuing years)
The writer continues:
I do itemize my deductions and this would continue to give me a greater benefit than the standard deduction.
This is the part that concerns me the most. The amount of itemized deductions has shrunk to just a few things and even those are limited. What worked before probably won’t work now.
If your strategy hasn’t been reviewed and revised this year, now is the time to pick up a copy of “Taxmageddon 2018.” It’s available at www.Taxmageddon2018.com