A Word on Taxes!

   Who doesn’t love listening to income tax commentary from media types that don’t have the slightest idea of what they are talking about?  Well, not me.  It’s exhausting.  With the latest “news” about President Trump not paying taxes over the course of some recent tax years, let me offer the smallest of small subset analysis from yours truly.  Facts on the ground people…

   Cyndi and I are investors in real estate…  So for fun, I added up all the “income” from our properties for tax year 2019 and the grand total was just over $3,000 in losses!  Any guesses what the income tax liability was for this “outrageous mismanagement”?  Zero.  

   Even better?  100% of those 2019 tax losses can be applied against other income or carried forward into future income earning years.  Glorious yes, but let’s not always presume anything from this set of data.  Each of the properties has its own “story”…  meaning one might have needed a roof, another might have needed paint and it might also be shocking to learn that under some circumstances, the IRS allows those expenses to be fully deducted right away.  My point being… each building has its own set of circumstances, depreciation schedule, expenses, etc…  it’s complicated!

   While this “complication” might come as a shock to the editors at the NY Times, it is very, very possible to achieve positive cashflow without “paying” taxes.  Shockingly simple and it’s all laid out in countless pages of the US Tax Code.  However, reading will be required, and I promise you, it will be boring.

   Here’s another little factoid.  While income taxes can be “avoided” (or “deferred”) in some years, property taxes can’t.  Those are annual, regular, and NOT avoidable.  So, quick calculation of all our properties showed that in total, we paid just under $140K in property taxes in 2019.  So, were “taxes” really avoided?  No.

Special sidebar…  Property taxes are deductible…  and so is interest, and travel, and paint, and lawn fertilizer, and lions and tigers and bears…

   Please know that while I proudly hold an accounting degree, I do not make my living filling out tax returns or giving tax advice…  I’ve got Jori and Ashley for that (thank you ladies) …  However, if you have questions about how a real estate investment or two or three can help you “avoid” or “defer” income taxes all while providing nice cashflow, lemeno!   

Walk on!