Tax Strategies & IRA Investing

Taxes can either take a big bite out of your real estate investing profits, or be the edge that gives you elite returns. The key is having a great tax strategy, and leveraging tax saving tools like IRAs while you invest in real estate.

I don’t know a real estate investor who loves taxes, but no one can afford to ignore them. They really can make a massive difference in how much you make and keep. If you aren’t already; you will likely soon be in one of the top federal income tax brackets once you start investing in real estate seriously. When you’re talking about generating high six and seven figures a year, and giving up 28% plus in federal income taxes alone; that starts to become very big numbers, very fast. Giving up some money, when you are making a lot more, may cause some to brush off taxes. But that’s a lot of money being left on the table. Money that could help you retire earlier, or even be given to charity, or invested more effectively directly in your own community. Serious real estate investors prioritize taxes.

Real Estate as a Tax Saving Tool

Real Estate itself is a universal tax tool, with plenty of built in breaks. There are many types of real estate related tax breaks, credits, and write-offs. This includes the mortgage interest deduction (MID), and depreciation.

But there is no reason to stop there. There are many ways to reduce your exposure, and tax burden. Forming a real estate business, specific property improvements, donating to charity, contributing to your retirement plan, and more thoroughly documenting your expenses can help individuals save many thousands of dollars on income taxes each year. And let’s not forget the benefits of having a real accountant and tax preparer in your corner.

Every real estate investor should have both an annual tax plan, and a lifetime plan. And this will help guide your investments, and ensure you are minimizing taxes every single day.

IRA Investing

Often referred to as self-directed IRA investing; this also includes self-directed 401k’s, real estate IRAs, checkbook IRAs, and IRA LLCs. These vehicles enable individuals to roll over their retirement accounts to self-directed accounts which let them invest in real estate investments of their choice, but with all the tax savings of regular 401k’s or IRA’s. That means double digit savings on income taxes each and every year. Even more powerful; those extra net gains are compounded year after year. Do the math, and you’ll quickly find you don’t want to invest any other way, at least unless you need cash to spend immediately. However, it is crucial to consult an experienced IRA administrator that will not only help you save when filing taxes, but that will keep you safe from the IRS with sound and legal transactions too.

I”ll See you at the closing table,

Marcel Umphery the “R.E.I. Successmaker”