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I've heard this somewhere and I'm sure there's more to it. With enough money, I'd imagine it'd be worth it to figure out the details.

I've heard this somewhere and I'm sure there's more to it. With enough money, I'd imagine it'd be worth it to figure out the details.

(post is archived)

[–] • 1 pt

A good accountant can help figure out the right way to do what you are trying to do. Just find out the “right” way to do it

[–] • 2 pts

You misspelled (((right))) way. It’s all usury laws and tax loopholes. (((Some))) get filthy rich exploiting them, while most of us are in the dark.

I’ve waken up. I’m moving to start figuring it out. Rental property is a huge one - the write offs are astounding.

[–] [deleted] • 0 pt

Rental property is a huge one - the write offs are astounding.

Please explain.

[–] • 1 pt (edited )

If you create an LLC that owns a rental property, you have access to tax write offs that will, in the IRS’s eyes, show massive losses. You get to depreciate the property, which is a big one, you get to put any expenses associated with the business on there - tax guy, cell phone, internet, car, some of your gas, some of your meals. Talk about business at dinner? It’s a write off /business expense. Swing by the property on your way home from your 9-5, it’s a business excursion, so gas is a write off. Do some maintenance on the property? You’ll need a vehicle to get there - write off.

All of these expenses will far outweigh the rental income you pull, so your LLC in massively in the red. Because of the structure of LLCs, that starts chipping away at your tax bracket, so you pay less in taxes. If you pull 150k salary, you get 60k pulled out of your check for taxes, etc. But your LLC loses 30k in depreciation, and another 24k in business expenses while only profiting 10k in rental income on the year, you’ve lost 44k in your business, so your total earnings drop to 106k. That ends up with a 30k refund from the gov.

Disclaimer - this is new to me, and I’m figuring it out as I go along. This is my understanding of how it works as of this point - after countless hours of research and conversations with those doing it.

Edit to add some links:

https://www.stessa.com/blog/tax-benefits-of-owning-rental-property/

https://pinefinancialgroup.com/blog/7-tax-benefits-of-rental-property-landlords-should-know-about/

https://realwealth.com/learn/top-10-tax-benefits-of-owning-rental-property/

[–] • 0 pt

Depreciation for 27 years. All your operating expenses. The mortgage interest and insurance. Any insurances. Your mileage. Your sales tax for anything. The property taxes. There’s more.

Some people hit a sweet spot on a building (i think 4 units max?) where you don’t need a commercial loan of much higher interest and then people live in one of the units for free. I’m sure you can use a different primary address and fabricate a deadbeat tenant and write-off the losses.

[–] • 1 pt

Ya I was thinking just "pay" everyone with 3000 year loans with zero interest. Ya maybe they'll have to make micro payments back, but overpay them the next 20 years worth of micro payments or something.

[–] • 1 pt (edited )

As long as you write the terms and it is clearly outlined, this can be legit and NOT tax evasion/tax fraud.

You can make the payback terms 80 years if you want to. They can become delinquent on the loan.

https://www.experian.com/blogs/ask-experian/do-you-have-to-pay-income-taxes-on-personal-loans/

Edit - This is the important part:

If you receive a personal loan from a friend or family member, there may be other tax implications, but the money still won't be taxable income for you. For example, if the loan has no interest or a below-market interest rate, as determined by the current "applicable federal rate," the IRS may consider it a gift rather than a loan.

Make the terms legit. You can make the payback period 80 years and backload the payment schedule so that they are paying most of it back, with interest, the last 5 years.

[–] • 0 pt (edited )

Deliberately giving someone a loan with the intent for them not to pay you back is of course tax fraud. You can do it in a way that’s difficult to prove beyond a reasonable doubt, but the taxman isn’t stupid, and that’s like saying it’s not murder if you don’t leave enough evidence behind

[–] • 0 pt

Deliberately giving someone a loan with the intent for them not to pay you back is of course tax fraud.

It is up to them to prove that. As long as you do not put into writing, "This loan term is specifically made so you do not have to pay it back", the burden of proof is upon the prosecuting party. If you have a bonified contract with payment terms that have legit interest tacked on, you'll be fine 100% of the time.

and that’s like saying it’s not murder if you don’t leave enough evidence behind

You are not guilty of murder until a jury of your peers convicts you of murder. You may have committed homicide, sure, but the guilty of murder charge only happens after due process. Your logic and reasoning are exactly why you can create a bonified loan contract and not be guilty of tax evasion when "giving" your money away. Just don't put that in specific writing no matter how angry the taxman gets (they will try to get you to turn on each other during an audit).

[–] • 0 pt (edited )

No.

Ever hear the phrase “getting away with murder”? You do not have to be found guilty of murder for the act that you committed to be murder.

the premeditated killing of one human being by another.

If you plan to kill someone and you kill them, it’s murder, whether or not you ever get caught, charged, or convicted.

If you move or hide money with the intention of avoiding taxes, it’s tax fraud, whether or not you ever get caught, charged, or convicted

[–] • 1 pt

As soon as you write it off as a tax loss, it becomes unreported income for the recipient - and they get taxed. That is my understanding. I'm not a tax guy.

There was a 10k limit tax free on gifting per person per year, I don't remember if it was only to a family member or to anyone.

[–] • 2 pts

So if I never write off the loss. The other person doesn't have to report the income? Seems like a win to me.

Obviously I'd consult a professional before employing this kind of strategy. But I feel these kinds of strategies are what the the elite employ to avoid harsh taxes. This getting a one up on people once you get past a certain wealth point.

[–] • 1 pt

So if I never write off the loss. The other person doesn't have to report the income? Seems like a win to me.

If they deposit a large sum in a bank, the bank may report it because of federal regulation requirements.

Car dealers and others may report large cash transactions.

The govt has about every possibility mapped out. Tax consultants can find legal ways to minimize your tax liability.

[–] • 2 pts

There was a 10k limit tax free on gifting per person per year,

It was $14k about 5 years ago. I know because I am very fortunate to have parents that set aside money to help me buy my first house and this was the top amount the mortgage people said I could be gifted without it being an issue with tax/credits/etc...

'#justWhitepeoplethings

[–] • 1 pt

It was about 15 years ago the last time I checked into this. Glad to see the Max went up.

[–] • 0 pt

Yes, send me the 100k and I'll do you taxes. You would have to use a schedule C or 1120 (LLC).

[–] • 0 pt

You're an expensive accountant!