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
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.
Rental property is a huge one - the write offs are astounding.
Please explain.
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/
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.
(post is archived)