Understanding real estate law–especially as it relates to entity selection and the tax code–can be the difference between just making money from your investments and making a lot of money from your investments.
By understanding how you can use the tax code for your benefit, you can better protect your assets. And if you are using your retirement funds to invest in real estate, there are special protections that will enhance your income–but only if you are in a position to take advantage of them.
And perhaps best of all, understanding these tax loopholes means you can keep even more of the money you earn. It is almost like beating the taxman at his own game. And nothing feels better than knowing you can win at real estate investing by using the tax rules for your own gain.
Ways you can use the tax code to your advantage
To use the tax code to make you even more money means fully understanding the various strategies available to you.
For example, understanding how to use depreciation allows you to legally take an expense on your property without having spent money–and this expense will often allow you to actually show a loss all while continuing to earn cash flow tax free.
Another loophole you will need to learn to exploit is to qualify for Real Estate Professional status in the eyes of the IRS. This status gives you a way to have paper losses without regard to your income. Achieving this status means meeting certain standards imposed by the tax collector, including how much time you spend on real estate investing activities.
Learn the angles from attorney and tax expert, John Hyre
It takes an expert to fully maximize the additional money you can keep from your real estate investment activities. You can gain that knowledge by learning from real estate tax expert, John Hyre. His course The Real Estate Investor’s KISS Guide to Bookkeeping will save you thousands of dollars every year.
A large part of reducing your taxes involves using the correct legal entities for your real estate deals and asset protection strategies. We highly recommend John Hyre’s The Real Estate Investor’s KISS Guide to Entities & Asset Protection.
About the Author:
J. P. Vaughan was the co-founder and Publisher of Creative Real Estate Online. She wrote the book How to Buy Your Dream House for 1/2 Price (Quantum Publications 1994, out of print). J.P. was also an attorney who practiced law in Michigan until she started investing in real estate full time in 1988.
J.P. passed away in October 2015 after a long battle with ovarian cancer.