Making more money is just a vanity metric
I give zero props for increasing your top-line income
But I give massive props for increasing your disposable income by saving on your biggest expense: Taxes
Here are 10 ways the rich save on taxes by buying real estate
🧵👇 #taxes
I give zero props for increasing your top-line income
But I give massive props for increasing your disposable income by saving on your biggest expense: Taxes
Here are 10 ways the rich save on taxes by buying real estate
🧵👇 #taxes
1) Depreciation - Phantom Expense
A theoretical expense on paper, which offsets your rental income.
IRS allows this as properties wear down over time.
You can even defer taxes at the sale with a 1031 exchange(explained later)
A theoretical expense on paper, which offsets your rental income.
IRS allows this as properties wear down over time.
You can even defer taxes at the sale with a 1031 exchange(explained later)
2)Buy, borrow and die!
When you sell, you halt compounding and on top pay exit costs.
IRS doesn't tax on appreciation so you can just hold the asset for that passive income.
When you sell, you halt compounding and on top pay exit costs.
IRS doesn't tax on appreciation so you can just hold the asset for that passive income.
3)No SS and Medicare taxes
Unlike a W2, you don't pay for these
Not much(~8%) but little adds up = economies of scale
Unlike a W2, you don't pay for these
Not much(~8%) but little adds up = economies of scale
4) Lower capital gains tax
Than ordinary income tax!
You can strategically sell real estate to cover living expenses
Eg- use deduction and depreciation in a year to lower your tax bracket and then sell multiple properties in that year with no or low capital gain tax. 🙌🏼
Than ordinary income tax!
You can strategically sell real estate to cover living expenses
Eg- use deduction and depreciation in a year to lower your tax bracket and then sell multiple properties in that year with no or low capital gain tax. 🙌🏼
5) 1031 Exchange
When you sell, you can avoid capital gain taxes by buying another property within a time period
Profits just roll in.
You also don't have to recapture depreciation :)
An epic exception!
When you sell, you can avoid capital gain taxes by buying another property within a time period
Profits just roll in.
You also don't have to recapture depreciation :)
An epic exception!
6)Live in rehabs
As long as you live in the home 2 out of the next 5 years, in the U.S. you can make a tax-free profit of up to $250,000 as an individual or $500,000 as a couple.
🔥
As long as you live in the home 2 out of the next 5 years, in the U.S. you can make a tax-free profit of up to $250,000 as an individual or $500,000 as a couple.
🔥
7)Seller financing or Installment sale
This just means the seller of an investment property receives the sales price over time. So because there is no one-time profit, the seller can defer taxes.
This is great when there is a huge profit as it can reduce your tax bracket
This just means the seller of an investment property receives the sales price over time. So because there is no one-time profit, the seller can defer taxes.
This is great when there is a huge profit as it can reduce your tax bracket
8) Cash-out refinancing
I can borrow tax-free on an asset when I need money
No need to sell when/if you need money hence no taxes on selling
If the new loan is attractive, this is a viable tax-free strategy to pull out a large cash pile to redeploy!
I can borrow tax-free on an asset when I need money
No need to sell when/if you need money hence no taxes on selling
If the new loan is attractive, this is a viable tax-free strategy to pull out a large cash pile to redeploy!
9)Self-Directed IRA
You are not just limited to investing in usual instruments like stocks, bonds, etc
Move your money to a self-directed IRA and you can invest in real estate with deferred taxes.
Surprising how most even don't know about it.
You are not just limited to investing in usual instruments like stocks, bonds, etc
Move your money to a self-directed IRA and you can invest in real estate with deferred taxes.
Surprising how most even don't know about it.
10) Die while owning
This sounds dire, but look up how the richest do this
Instead of facing the tax issues of recaptured depreciation or capital gains tax, your heirs inherit a stepped-up basis.
This sounds dire, but look up how the richest do this
Instead of facing the tax issues of recaptured depreciation or capital gains tax, your heirs inherit a stepped-up basis.
Lastly,
You could have legit reasons to pay the taxes based on your lifestyle.
This thread is just exposing some options for your consideration.
You could have legit reasons to pay the taxes based on your lifestyle.
This thread is just exposing some options for your consideration.
That's it, folks!
If you want more detailed insights, behind the scenes on my live deals like my diligence process, how I raise capital, financial analysis, document templates, etc.
Consider joining a private community here:
rehacks.io/plans
If you want more detailed insights, behind the scenes on my live deals like my diligence process, how I raise capital, financial analysis, document templates, etc.
Consider joining a private community here:
rehacks.io/plans
I hope you've found this thread helpful.
Follow me @rehacks_ for more.
If you can, retweet the first tweet so I can spread the insights and help more people 🙂.
Follow me @rehacks_ for more.
If you can, retweet the first tweet so I can spread the insights and help more people 🙂.
https://twitter.com/rehacks_/status/1514305004722528261
• • •
Missing some Tweet in this thread? You can try to
force a refresh
