How do the rich make more money and pay less tax? The basic formula really is pretty simple. In fact, it’s how Pres Trump is able to legally pay little to no taxes.
The short answer is in this Tax Minute:
Make sure you subscribe to the YouTube channel by clicking the “subscribe” button on the right hand side of the video. You’ll get short little snippets of tax strategies that put more money in your pocket and tax pitfalls to avoid. Just one minute a day is all it takes to keep up-to-date on what you need to know when it comes to tax strategies.
The wealthiest people have either made their money in real estate or hold their money in real estate, or sometimes both.
Here’s how it would work if you have a business. Take the money you make from your business and invest it in long-term passive rentals. Make sure you qualify for the 20% income deduction by making sure the property net income is QBI (qualified business income). That means:
- Separate books and records for each property,
- 250 hours of real estate activity, (new definition & qualification for this) and
- Starting in 2019, a log of day, time, who and what for the real estate activity.
Otherwise, the plan is to create a loss with your real estate by taking all of your direct, indirect and phantom (depreciation) expenses. If your income is under $100,000, you can take a deduction of up to $25,000 of the loss. If your income is over $150,000, you can’t take any deduction until you sell the real estate.
The exception is if you qualify as a real estate professional. If you’re married, filing jointly, you or your spouse can qualify. If you get the qualification designation, you can take an unlimited amount of real estate losses (mainly depreciation) against your other income.
If you’re a real estate professional and you’re paying taxes, then there is one of two things wrong:
- You don’t have enough real estate, or
- You aren’t taking advantage of the tax deduction that is allowed to you.
There are a lot of strategies packed into this block. These are the types of thing that we talk about as part of the US TaxAid twice monthly coaching. You can find out more at: https://www.ustaxaid.com/coaching-program/.
If you’d like to get more information on becoming a tax client, getting a personal consultation with me or joining the coaching program, give Richard a call at 888-592-4769.