Tax Reform Ramifications for Real Estate Investors

It’s tax time!

For most people, the month before April 15 is the only time they think about taxes. Today, we’ll chat with Tom Wheelwright, CPA, about why you should change your mindset.

We’ll discuss the implications of the recent tax reform bill and how YOU can plan strategically to bring down your taxes — and increase your wealth.

Taxes are the price you pay for making an income … but that doesn’t mean you can’t manage your tax liability and get smart about how much you’re paying.

In this episode of The Real Estate Guys™ show you’ll hear from:

  • Your tax-talking host, Robert Helms
  • His taxing co-host, Russell Gray
  • Tax advisor for real estate investors Tom Wheelwright, CPA

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How does the tax reform bill affect you?

Tom Wheelwright is a personal tax advisor for The Real Estate Guys™ and Robert Kiyosaki. His goal is to help real estate investors build wealth … without losing it all to taxes. He even wrote a book on the subject, Tax-Free Wealth.

Tom has read the new tax law not once, but twice! We’re comfortable calling him an expert on the subject.

Is the tax law out to get you? Absolutely not.

Tom says the first few pages of the tax law cover ways to raise revenue. The rest is a series of incentives … and that’s true in EVERY country.

If you want to know what your government wants you to do, look at the tax law. Take a closer look, and you’ll see built-in real estate incentives.

That’s because real estate is the preferred investment vehicle for many governments. Why? Because it provides necessary housing.

The tax law gives you a ROAD MAP to reduce your taxes.

So, instead of complaining about how the government is taking all your money and then doing nothing about it, PARTNER with the government. Figure out what incentives are available … then take advantage of them.

What about the 2018 tax reform? Tom says to remember that some parts of the bill are effective retroactively. For example, if you bought a car between October and the end of the year, you may have a big tax break coming.

By using the home office deduction, you can double your car purchase deduction. A big key for April 15, says Tom, is to make sure you take ALL the deductions you’re entitled to.

And don’t get worried about the impacts of the new tax bill. Tax changes move slowly. Realize that your tax strategy and your investment strategy impact each other … and recruit an accountant to help you fine-tune your plan.

Start thinking about next year’s taxes NOW

We asked Tom how to approach next year’s taxes in light of this year’s reform.

“There are so many big changes,” says Tom.

For example, Section 179 now applies to residential real estate. This allows you to deduct equipment … including roofs, HVAC systems, security systems, and more.

So when you’re improving your properties, an important factor to take into consideration is the tax impact and potential deductions.

Another huge change is that bonus depreciation now applies to used property. So, you could get a huge deduction in year one.

Another change that affects you is the 20 percent deduction for pass-through businesses. That deduction absolutely applies to real estate investors … if you have a positive net income.

To make sure you’re getting maximum benefits, sit down with your tax provider and lay out your plans for the next year. The right tax professional will help you figure where there is the most permanent tax benefit … instead of pushing options that will be lucrative in the long term but counterproductive in the short term.

To do depreciation recapture, Tom says you need to get your tax advisor involved. If you’re doing it right, ultimately there should be very little recapture … and thus very little taxable income. To avoid paying taxes on properties, you can do a 1031 tax exchange.

And as every real estate investor knows, borrowing does not create taxable income.

How to choose the right tax advisor

When speaking at conferences, Tom likes to ask whether attendees’ accountants have told them NOT to take the home office deduction.

If the answer is yes, that’s a sign you’re ready for a new accountant. “You don’t want an accountant who is afraid of the IRS,” says Tom.

HOW you pick a tax advisor depends on WHAT you want one for. If you want someone to record historical information, any accountant will do.

But if you want someone to reduce your taxes going forward, you should look for someone who asks you questions about what is happening now and what will happen in the future.

It’s essential that you’re paying attention to the future … because your tax picture WILL change. According to Tom, “Most people have really good business strategy, but almost no investment strategy.”

A good tax advisor will help you project what will happen 5-10 years down the road. Why? Because you can’t change the past … but you can change the future.

The right tax professional will also reach out to you with updates on a regular basis. You shouldn’t have to bug him or her to get information.

Outside of your spouse, your tax advisor will have more impact on yourself, your future, and your financial situation than any other person. So build a relationship with an excellent tax professional.

And if your current accountant doesn’t sound like the professional we’ve described above … you may have outgrown them.  

Want to know more about how to choose the right tax professional? In his book, Tax-Free Wealth, Tom describes 10 questions you should ask your accountant … and 10 questions your accountant should ask you! He’s making this chapter free to listeners of The Real Estate Guys™ radio show. Listen in to the show to find out how to get your complimentary copy!

More about our favorite wealth strategist

We also asked Tom about his new platform, WealthAbility. The site is a collection of tools and educational resources to help people like YOU earn more … and pay less in taxes.

The platform is paired with a global network of accountants and firms that understand tax-free wealth strategies.

If you want to hear more from Tom, check out WealthAbility or his wealth strategy firm, ProVision. Also consider coming to our brand-new Future of Money and Wealth conference, where Tom will be a speaker.

Some final words of wisdom

Remember that different investments have different tax ramifications. Gold and silver is very different from real estate. A couple single-family investments will be very different than a dozen multifamily properties.

And residential real estate is a world away from commercial. Whatever investment class you choose, don’t forget … there’s always a tax advantage.

One thing we know about taxes … “Experts predict tax laws will always change OR stay the same in the future,” says Robert. Pretty hard to argue with, right?

People in and outside of the government will always try to manipulate markets to get certain incomes. It’s your job to set your prejudices aside and focus on the best outcome.

There will be losses … so make sure you’re not the one eating them. And there will be winners … make sure you’re one of them!

It all starts by getting connected with the right ideas, the right people, and the right environment. That includes that right tax advisor!


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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

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