Tax loophole forces government to pay you

Jim_SamsonAfter all the years of shelling out money to the government, they’re finally going to pay you back.

But they’re not going to just send a check to everybody’s house with a letter apologizing for all the money they’ve taken. They’ve set it up so only the people who know what they’re doing will receive this money.

I’m a little bitter after all the money the government has taken from me, and I want to expose this little loophole to you so you can ensure that the government starts paying you.

They say they want to pay you back, but they don’t think anybody is smart enough to claim it. Let’s prove them wrong.

The tool that we’re going to be using to force the government to pay us is real estate.

Real estate investing can be very profitable to those who know what they’re doing, but when you combine those profits with tax credits and deductions, it becomes a goldmine.

These tax credits and deductions are what the government pays you, but they aren’t made obvious to the common investor.

I want to introduce you to some extremely powerful tax credits and deductions that’ll ensure the government is paying you every penny you deserve.

Real estate investments seem like they belong to an elite group of experts. It’s set up this way so that your average Joe doesn’t see how easy it is to make a massive fortune from only a handful of real estate deals.

Anybody can jump into real estate investing at any time, and a lot of the time it takes barely any of your own money to get started—that’s what the banks are for.

But to expose how profitable real estate investing can be, here are a few of the tax incentives involved:

Rehabilitation Credit

By claiming this credit, the government will pay you to rehabilitate a residential or non-residential property.

This is a fancy term for renovation, although it doesn’t have to be a complete rebuild for you to be eligible for this credit that could be worth up to 20% of your total investment.

To be eligible for this credit, you must invest $5,000 into your property within two years. This would be considered a standard amount for what you’d pay to renovate a property anyway—why not get paid to do it?

What makes this credit even more interesting is that if the building is located in a disaster area, such as those impacted by hurricanes and other weather-related damages, your tax credit could increase up to 26%.

A lot of people miss out on this simple tax loophole because they’re uninformed, and the government gets away with keeping the taxpayers money.

Residential Energy Credit

Keeping up with the latest environmental trend will not only make you feel good for doing your part in saving the earth, but it’ll also force the government to pay you a nice yearly sum.

By converting your investment properties to utilize solar energy, solar water heating, wind energy, and geothermal heat energy, you could receive a 30% tax credit.

Not only is this tax credit great for your wallet, but it’ll make your property more appealing to buyers or renters who are environmentally conscious and want to play their part.

This credit forces the government to pay you for making your home more efficient and desirable.

Investment Credit

This credit is something that every investor should be taking advantage of. As long as you’re planning on owning the property for longer than a year (which most people do), the government is willing to pay out a 15% tax credit.

The investors who benefit most from this tax credit are those who make capital gains of less than $74,900 per year.

Without this tax break, the taxes you would have to pay on any taxable income below $74,900 would be 15%. The government has to pay you back all your taxes on capital gains from property up to that amount.

For example, if you made $60,000 off selling a single property, and your neighbor made $60,000 from his home business, this tax credit would ensure that you keep every penny of that $60,000, while your neighbor would only receive two-thirds of his income after income tax and self-employment tax.

The advantage of this property tax credit allows you to build your investment portfolio on the government’s dime.

Depreciation Deduction

Although this is not a tax credit, it might be my favorite out of the bunch. A deduction differs from a credit in the sense that you’re allowed to deduct certain expenses from your taxable income, as opposed to receiving a tax credit after the fact.

A depreciation deduction allows you to claim money back for any potential depreciation the property might be susceptible to.

The IRS considers a property to reach 100% depreciation after 27.5 years. Therefore, after that allotted time, you’ll have been able to deduct the whole price of your house, while the appreciation covers any actual expenses.

This one will seem a little complicated to wrap your head around at first, but I’ll give you an example to help clarify it:

You bought a house for $200,000. For convenience sake, let’s say the house covers 85% of the land (the land does not depreciate, and is therefore not considered in the depreciation deduction). So your house, minus the land’s value, is worth $170,000.

So, that $170,000 is what you’ll eventually be able to deduct over the 27.5 years. You’re able to deduct $6,182 ($170,000/27.5) from your property taxes each year.

Now, say your income from rent, after expenses and maintenance, comes out to $500 per month, or $6,000 per year. You’d usually pay taxes on that $6,000 income, but because of your deductible amount, you don’t.

From that $6,000 income, you’d minus the depreciation deduction of $6,182, leaving you with a net income of -$182, which of course is a loss.

It looks like you’ve made a loss on paper, but you’re actually collecting that money from the government each year for your not-so-stressful troubles.

The value of this depreciation deductible is then amplified when you consider appreciation—which is averaged between 3% and 5% in the U.S.

These tax loopholes that force the government to pay you for investing in real estate should be all the incentive you need to dive in.

There’s so much money to be made from real estate profits alone. The government payout simply becomes an extra source of income.

Bookmark and Share facebook twitter twitter

Leave a Comment