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Snippet of 7 Figure Flipping with Bill Allen Episode 409: How to Cut Slash Your Taxes This Year

From Audio: Audio of 7 Figure Flipping with Bill Allen Episode 409: 10 Strategies to Slash Your Taxes This Year

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Listen now to snippet “How to Cut Slash Your Taxes This Year” from 7 Figure Flipping with Bill Allen. Learn strategies to pay less with your 401K, HSA, and Opportunity Zones.
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Listen now to snippet “How to Cut Slash Your Taxes This Year” from 7 Figure Flipping with Bill Allen. Learn strategies to pay less with your 401K, HSA, and Opportunity Zones.
Learn the strategies, systems, and secrets of the nation's top house flippers, wholesalers, and real estate investors right here on The 7 Figure Flipping Podcast with Bill Allen! Bringing you deep-dive interviews and insights on flipping houses and wholesaling real estate, 7 Figure Flipping is the ultimate online resource to accelerate your real estate investing journey.
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All right, everybody, let's talk about taxes. So 2020 has been a crazy year. If you are depending on where you are in your business, lots of things could have happened this year for you could have made a ton of money. You could have lost some money you could have broken, even you'd be all over the place. But at the end of the year, every year I kind of think the tax strategy starts on January 1st, if not before, right for the year. But at the end of the year, there's some things that you could do and think about to help you make the best. Now that you know what you've made, you've known what the year has looked like. You could make some very strategic moves. Towards the end of the year, I jotted down a couple of notes and some things that I've done for you to think about, and I'm not gonna talk in detail about what I'm doing. But these air, some ideas and some things that you could think about in your business and your life. Everybody's individual situation is different, so I highly encourage you talk to a C p a talk to an attorney, a state plan or whatever it is that you need to talk Thio in your particular, uh, like your situation to go do that. But here's a couple of ideas and some things that a lot of our members inside of our mastermind group are doing using and thinking about this time of year. So one thing for me that I like to do every year is I like to put money into my 41 K my retirement plan. So I fund you guys probably heard my friend Tom Lonnie on here talking about the infinite banking concept, this life insurance policies that I have. So I fund that I fund my Roth IRA. So if you make too much money to fund a Roth Ira, or you think that you dio there's something called a backdoor Roth Ira that a lot of high net worth people do. And basically it's just putting money into a traditional IRA. It's not, uh, using after tax money to fill up your traditional IRA and then converting it to rough. And so I do a backdoor Roth ira for myself and my wife, and then I also have a employer plan 41 K plan for my company. So before I had any employees, I used a solo 41 K. Now I have a safe harbor 41 k. Since I have some W two employees and I'm allowed to put money into my 41 K. So I fill up my Roth and then I do a pretax Um uh, like bonus from the company. So the company match that I have. So the company matches money, and that's a tax deduction. So its pretax money that goes into my traditional 41 K plan so I could do that. That's one thing that I do to reduce my taxable burden. So that's a write off on the taxes. And I like filling up the 41 k. So I do. I r A. I do my life insurance policy. Then I do my 41 K and I believe don't quote me on this but 2020. I think it's $58,000 max per person for a solo 41 K Sepp IRA type structure or a safe harbor like I have. So that's one thing that I do then and I really like that. The other thing is hscei. So a health savings account is another tax benefit that you could have if you have a high deductible insurance plan. So NHS A is another thing you might wanna look into, and you can self direct these accounts. So I have all mind self directed. I do loans. I invest in multi family buildings. I do all kinds of stuff inside my IRAs and 41 case, I don't have NHS A because I'm still in the military and I have Tricare. It's a low deductible plan, but if you have a high deductible plan, you could look into an H S. A. Some pretty cool stuff you can do with that. Um, the other thing that could have happened to you this year and hopefully you took advantage of it was some capital loss harvesting potentially if you're invested in the stock market. So when you have some losses in the stock market, what you could do is you can actually sell your stock at a loss and then go buy something that's kind of comparable, but not the same, right and go buy it and then it could go up. So this I don't know, stock market was down around 18,000. Some point, it's over 30,000 now. So as you see your stocks going up and down, you can, uh, you can. Basically, capital lost harvest or capital gain harvest, potentially depending on what you want to do for your stocks. So something to think about. You might just want to Google capital loss, harvesting and look into that. So there's a couple different things that you can find similar but not not exact index funds things like that that a lot of people use when their stocks go down significantly. You could take that capital loss, uh, put it on the books and then go buy something else around that same price that that can then go up in the future. So that's something that I've done in the past, a lot of when IM is investing in the stock market. So if any of you are still in the stock market, capital loss harvesting is something you could think about. The Section 1 79 deduction is one that I really like and you should look into. It's basically about buying some heavy equipment machinery for your business. So think airplanes, vehicles, um, construction equipment, stuff like that on Do you could do a bonus depreciation where you can appreciate 100% of this in your one. So if you put into service so you still have time in December to go buy something and you could let's say you buy a big, heavy truck, right and f 3 50 or something for your business, and you put into service on December 31st and you use it 100 percent for business. That day of December 31st is in service. Then for 2020 you can write off 100% of that, potentially under this section 1 79 deduction for your business so you can take it. And, um, not on Lee. Do you have to? You don't have to pay cash for this either. That's a really cool thing. So I always thought I had to pay cash for this stuff. But you can finance that. You could finance 100% of that vehicle and write it off and get a major deduction on your taxes under 1 79. So take a look into that Section 1 79 deduction. I did a YouTube video on it earlier this year, and you can go to YouTube are seven figure flipping YouTube channel and check out our Section 1 79 deduction video. I go into a lot more detail on that. I've done some sections 1 79 deductions on my taxes. I have an airplane that I fly around for the business now, and I absolutely love flying the airplane, but I was able to appreciate it. And then as I fix up the avionics and do paint and and make repairs and do different things to it, it's a business right off for me. So Thea other thing is opportunity zones. So opportunity zones is another area you might wanna look into. If you're buying and holding residential real estate or commercial real estate and the opportunity zone, there's a lot of a lot of things that you could do with that. It might be a little bit too late. Set up an Opportunity Zone fund this year, but something to think about. Look into and see if your area is in an opportunity zone. I'm not gonna go into too many details. But that is a good thing to to look at and think about. The other thing that you could do is a cost segregation study, so I mentioned bonus depreciation. If you have rental property or you have commercial real estate, there's the opportunity to do a cost segregation study and even a single family home. You're probably depreciating it year over year, right? And if you're not, you should be. Because whether you appreciate it or not, the IRS looks at it like it should have been depreciated. So always, Always, always, always. You have to appreciate your real estate. Okay, so with a commercial building or a rental property, you're able to do a cost segregation study on this and then do bonus depreciation where you can actually depreciate that piece of real estate in your one instead of over 27 a half years, or depending on what it is is. There's different timelines and structures for each of these items inside the property, so this is massive for us and really what has allowed me to reduce my taxable income the past couple years, and I started buying commercial real estate apartments, things like that and being involved in syndications. Getting schedule sees with major losses on him because we did bonus depreciation near one. So big write offs for me to allow me to reduce my active income, and the reason I'm allowed to reduce my active income is because I'm a real estate professional. So take a look at qualifying for a real estate professional. If you work a full time job and you're just a part time real estate investor, one strategy is toe. If you're married and your spouse stays at home, then consider trying to get have your spouse become a real estate professional. Um, if you're a full time real estate investor, you really don't have a problem qualifying as a real estate professional, Just talk to your CPA. Tell him I want to figure out how to qualify as a real estate professional. That way, you could take these all this appreciation that we're talking about all these write offs, all these different things and offset your active income. And that's the key if you make 3 $400,000 active income, but you have $500,000 in losses. Next thing you know, you're writing off $100,000 loss in your in that year for taxes. And so that brings me to my next point. So cost segregation studies bonus depreciation, big write offs on your taxes. One recommendation I have for you is, ah, single family homes is a company called K B K G. So I think it's k b k g dot com. You can go there, and they have software tool that you can use. Just check with your CPA and make sure that they're willing thio to sign your return. Using that as your cost segregation study, you basically input some information about it. It's like five or $600 per property, as opposed toe thousands of dollars tens of thousands of dollars for larger commercial buildings. And that's one way to go for your costs. Eggs for your single family. Reynolds. If you bought 15 single family rentals this year and you could do individual cost segregation on each of them could do bonus appreciation in your one. You could have massive right offs this year to reduce your active income if you're a real estate professional, so from that so let's use that example that I had. I had a $400,000 of active income. I wrote off 500 $1000 on schedule sees because the bonus depreciation, all the other things that I had going on, right, so have this $100,000 in Los. So then one thing that I could do, which is really cool, is, let's say I put all that money into my traditional 41 K right? And then I talked about all that company match in that 41 K. Maybe it's 36 $37,000. Well, I could take that and convert that from traditional to Roth. And that's a taxable event, right? So it's a tax write off that $37,000 that went in there is a tax write off. But my conversion now would be at my tax bracket. Well, if I have $100,000 loss and I converted $37,000 for my traditional to my Roth, my taxes on that are gonna be zero. So it's basically a free conversion from traditional to Roth that I could then grow for the next 30 years. 40 years, however old you are, however, long you're gonna grow that inside of your IRA or 41 K tax free because this move over to Iraq.
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