I know you’re with me when I say the first few weeks of April are horrifying…
Tax Day has to be the worst day of the year. You have to shovel out hard-earned cash that you’ll never see again.
But what if I told you that I have 5 real estate hacks that’ll legally cheat the tax man? Don’t worry if you don’t own any investment properties yet, because these tax loopholes will dissolve almost all your risk when jumping into your first investment, and it’s all done by legally dodging the tax man.
Tax Day will become a day when you get paid!
Just imagine a world where you happily file your taxes early each year. Well, these 5 property hacks will introduce you to that world.
There’s thousands of different ways you can dodge the tax man. Within those thousands there’s hundreds of ways you can LEGALLY dodge the tax man. And within those hundreds, there’s 5 ways you should be legally dodging the tax man RIGHT NOW.
These 5 property hacks are all you need to turn Tax Day into pay day…
Property Hack #1
If you’re a beginner in the real estate market—meaning: you haven’t invested yet, or you’ve recently bought your first investment property—this hack is perfect for you.
The biggest qualm people have with real estate is the inherent risk that’s involved, but this allows you to write off up to $25,000 in passive losses per year.
There’s a single catch I should warn you about, though… you’re only eligible for this if you make less than $100,000 per year.
This $25,000 write-off will come from your spouse or any business partner’s taxes. The rule states that any investor (your spouse or business partner) that doesn’t play a material role in the investment can write off up to $25,000 a year.
This is money that you can use to reinvest, or take as profit.
Property Hack #2
These next two hacks require you to qualify as a real estate “professional,” but hold any negative reservations right there!
Real estate “professionals” don’t need to be licensed. The only qualification you need to be considered a real estate “professional” is that you spend more than half your work time on real estate (20 hours a week or more).
Spending time on real estate includes any studying, research, or property managing you do. This is a lot easier to do than it sounds.
And it’s extremely worth it. By being considered a real estate “professional,” you can use the same methods in hack #1, and write off up to $100,000 in passive losses.
Property Hack #3
Now that you understand how easy it is to become a real estate “professional,” you need to be aware of this hack.
Real estate professionals can sidestep the Obamacare capital gains surtax, which is 3.8%.
If we’re considering a property that’s worth $600,000, you’re looking at legally cheating the tax man out of $22,800 a year. That’s a nice chunk of income.
Property Hack #4
This hack uses something called cost segregation to hack depreciation.
Depreciation can be written off in your taxes, but the issue we have is that residential real estate isn’t eligible for depreciation until after 27.5 years.
That’s where cost segregation comes in. Cost segregation frontloads depreciation into the early years of your investment.
An example of cost segregation: Your House is worth $500,000. You can segregate costs by saying the building is worth $350,000, and fixtures/appliances make up the rest.
Therefore, only the $350,000 will take 27.5 years for you to be able to claim depreciation. But, depreciation on the $150,000 in fixtures/appliances kicks in within a few years.
You’ll be able to claim a decent sum of money back from the depreciation of the fixtures/appliances.
Property Hack #5
Deduct routine repairs.
Making routine repairs several times a year allows you to deduct those costs completely when filing taxes.
When the government sees that you’re consistently maintaining your property, they understand that the property will be worth more in years to come.
They’re ultimately looking at the taxes the next buyer will pay, and that’s why the tax man is able to look the other way when you make routine repairs.
You can use most of these property hacks together, or you can opt to try one or two out at first.
But I must warn you: the tax man will take every last penny you have unless you use these simple hacks to legally cheat him.