How a Client Used Tax Savings to Quit His Job
There are 3 different strategies that are most used by my clients to build their wealth and cash flow:
Businesses,
· Crypto investing, and
· Real estate investing.
Building Businesses As a Way to Wealth
Businesses are one of my favorite ways to wealth because they provide the best path to turn your time and knowledge into cash. Either a big pile of it or a steady flow of it.
And you can literally turn the things you know, that exist just in your mind, into dough.
With systems, you can use other people’s time to create passive and/or leveraged income. You can create value that you can sell. And perhaps most importantly, you can create quick cash especially if you’re selling services.
You can take deductions for things you may normally pay for personally, as long as you can prove that the expense is “ordinary and necessary†for the production of income.
The tax breaks are definitely better for business owners than employees.
Crypto Investing as a Way To Hedge Against Inflation and More
Crypto started out as a way to increase wealth. The value went up (sometimes WAY up) but you had to sell the asset in order to get cash.
Just based on that, it was a good investment, but for taxes it’s not great. Pretty much anything you do with crypto, sell, trade, exchange, receive a fork, buy services or products, etc. will create a taxable event for you.
And unless you’re mining, you don’t get to take any deductions to offset the capital gains income.
But more than that, I didn’t like the fact that there was no cash flow. There were no strategies that provide cash flow like the recently introduced various versions of Decentralized Finance (DeFi). Still though, there are not many tax breaks with crypto.
Real Estate is Where It’s At
Real estate provides:
Cash flow
Appreciation, and
Outstanding tax breaks.
That’s why I’m still a fan of real estate investing. I’ve been working with real estate investors and their tax planning for decades and in that time I’ve seen a lot of success stories. Also some cautionary tales, for that matter.
A client came to me with a plan to use his 10 federally backed loans to build up a portfolio of free and clear houses. He was buying properties for 20% down and since they were less expensive houses in the Midwest, that mean he had to come up with $24,000 to close. He could save $12,000 per year, and that meant he could buy a house every two years.
He wanted to move faster.
With real estate investing, there are a lot of tricks we can use to create paper losses. But there is one big problem.
If your adjusted gross income is over $150,000, you can’t take any of the paper losses against your other income.
You won’t have to pay tax on the cash flow you get from your rentals, but you can’t take full advantage of all the tax breaks
In my client’s case, he qualified as a real estate professional according to the IRS’s rules. That means he could take a full write off of the paper losses he legally created for his real estate investments.
He saved enough on taxes to buy a property each year instead of one every two years.
That accelerated his plan enough that instead of 10 years he though it would take until we could retire, he did it in less than 7.
Tax savings can mean more money in your pocket for fun things. It can mean more money in your pocket for necessities. And it can mean more money for investments, building up your retirement funds or to finance more freedom in your life.
What would more money in your pocket mean for you?
Join our Wednesday night coaching or set up a consultation with me. Let’s see how we can help! https://ustaxaid.com/coaching-program https://www.ustaxaid.com/consultation/