How Real Estate Investors Can Minimize Ongoing Taxes

Most Real Estate Investors have heard of the 1031 Exchange.

Did you know there are 17 different tax minimization solutions for reducing, deferring, or completely eliminating the tax bill on the sale of a Primary Residence, Second Home, or Investment Property.

In this series of posts we will discuss the 17 Real Estate Tax Minimization Options available to you in five categories. The fifth category is Real Estate Income Tax Reduction with many options to choose from.

Category 5: Real Estate Income Tax Reduction

Unlike the previous options we discussed in this series, Real Estate Income Tax Reduction includes a long list of options versus one primary strategy with a few ways to implement it.  

In general, Real Estate Income Tax Reduction is designed to increase depreciation or take advantage of specific tax deductions or tax credits.

From a process perspective, we would need to meet and understand the asset in question, then determine which options your asset qualifies for. Then, we would gather information to get complimentary estimates of how much could be saved and the cost to implement them.

Armed with this data, we would then make decisions on which solutions to implement and in what order to optimize for the maximum income tax savings.

If you'd like to pay less in taxes, schedule a complimentary consultation with a Tax Strategist at DeferTax.com today! Call 877-829-7927 or book an appointment here…

Steps:

Below is an example to illustrate one client’s income tax minimization journey.

1.     Step One – Define the Asset

Paul has a 200 unit apartment complex with multiple buildings. No building to more than two stories and there is parking and green space around the buildings.

2.     Step 2 – Determine the Options

By walking through the list of options below we discussed which options make the most sense for this property type. In this case we chose to explore the following:

·        Cost Segregation Studies  - Accelerated Depreciation

·        Fixed Asset Review – Review of all assets for a business

·        Capital to Expense Studies – Retroactively change previous capital expenditures to expense

·        Asset Retirement Studies – Correctly identifying ghost assets

·        45L Energy Efficient Home Credit – Builders credit for new or renovated homes

·        Demolition Costs – Maximize write-off vs capitalization

3.     Step 3 – Get Estimates

We then gathered estimates for the items on our list. We worked with two companies and a CPA to understand the overall opportunities and impacts.

4.     Step 4 – Select Investment Options and Determine Implementation Order

The client decided to use three of these strategies. In order to maximize the benefits of these Real Estate Income Tax Reduction options, we decided to implement them in the following order.

a)     45L Energy Efficient Home Credit – Tax credit for new or renovated homes

b)     Asset Retirement Studies – Correctly identifying ghost assets

c)     Cost Segregation Studies  - Accelerated Depreciation

Real Estate Income Tax Reduction List

Note, this list changes all the time. The latest information is located in our online investor training site, DeferTax University.

Summary,

There are many Real Estate Income Tax Reduction options to choose from and each one has specific requirements to qualify. Selecting the right options, working with the right contractors, and implementing them in the correct order are key to optimizing your tax benefits.

These are complex strategies and should be explored with the help of an expert who places your best interests first. Let’s face it, if someone has one or two options, they are not a tax strategist. They are a salesman trying to sell you their product.

We have over 40 tax minimization options on our platform. We are nationwide educators and keynote speakers on Tax Minimization. We are also real estate investors, business owners, homeowners, and high income earners. We use the strategies we recommend!

Once you pick the right strategy that is right for you, we connect you with our network of vetted providers that are “best in class” in the industry. How do we know that? We use them ourselves. You can work with one of them or someone else. It is entirely up to you.

Our exploration of real estate tax minimization in this series is almost complete. Next in our final blog for this series on Real Estate Tax Minimization, we will explore your final option if none of the other options we have explored works.

I hope you found this document informative. We have more detailed content and videos on this tax strategy at DeferTax University. Click here to learn more.

Our website, StartAnExchange.com The easiest place on the internet to Start an Exchange, has more information and educational materials on the 1031 Exchange and more ways to save when exiting an exchange.

Our website, DeferTax.com, has more information and educational materials on over 40 tax minimization options for a primary residence, second home, investment property, business, stocks, crypto, and ordinary income tax reduction.

If you'd like to pay less in taxes, schedule a complimentary consultation with a Tax Strategist atDeferTax.com today! Call 877-829-7927 or book an appointment here…

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