Thursday, December 10, 2015

Tax Favored Environment

CPA and Attorney Mark Kohler, at a REAPS meeting last year, advised investors to own or start a small business (even MLM, but we will save that for another blog), invest in real estate, and take advantage of operating in a tax-free or tax-favored environment. These are notes from that talk.

Potential deductions for real estate investors, or anyone operating a small business are:
  • medical insurance
  • family employees, employees, subcontractors 
  • annual meetings/retreats
  • capital expenses
  • equipment and furniture
  • business travel
  • meals and entertainment
  • business board meetings
  • job-related education
  • legal and accounting fees
  • office rents and utilities
  • office supplies
  • business gifts
  • repairs and maintenance
  • parking fees
  • telephone, ipads, internet, office expenses
  • professional dues
  • postage and shipping
Travel is more carefully scrutinized, but some ideas for real estate investors are to buy something, negotiate an agreement, or submit offers, even if they are rejected; visit a rental, hold a corporate meeting, or meet with a client or vendor.

Keep in mind that these are typically paid with pre-tax dollars.

Here are a few reasons that Mark Kohler recommends investing in real estate:
  • The tax write-offs are incredible when you treat it as a small business. You
    may get to use those deductions against your ordinary income, but if not, they
    will carry forward until you sell any rental property.
  • The value of the property will grow tax deferred until you sell, and you may
    even use other strategies to delay or avoid the gain entirely.
  •  The far majority of rental properties allow investors to create tax-free cash
    flow based on the amount of write-offs related to the property.
  • You can leverage your money to buy more ‘investment’ and thus increase
    your ROI- Return on Investment (something you can’t do with stocks, bonds
    or mutual funds).
  • You can involve family members, travel to check on your rentals as a valid
    business deduction, enjoy average appreciation and growth that out performs Wall Street, and a variety of other benefits. 
  • MOST IMPORTANTLY…it’s like a forced retirement plan.

Happy Investing!

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