Most people think of tax season as January 1 to April 15.
After all, that’s when most people close the books on the previous year, issue and collect tax documents, prep returns, and settle up with the taxing authorities.
But for a host of real estate investors and entrepreneurs, the REAL tax season is right NOW.
It’s a HUGE opportunity to dramatically improve your bottom line. And it just got BETTER …
States Fail to Overturn SALT Deduction Caps in Court
Forbes, 10/1/2019
Yes, that’s a wonky headline that may not convey intelligible information … much less exciting opportunity for the casual reader.
But before you wander away bored, invest a few minutes to dig a little deeper …
For those unfamiliar, the recent Trump tax overhaul put a cap on the amount of State And Local Taxes (hence, the acronym SALT) that a taxpayer could deduct from their federal income tax bill.
There’s some political disagreement about whether this is good or bad, or what the motivations might be … but the bottom line is it’s the current law, and for now the courts are upholding it.
So what does it mean?
In short, high-income earners in high-tax states are now bearing the full weight of their tax bills at the federal, state, and local level.
High-income earners in high-tax states are paying MORE taxes.
As you might imagine, they’re not happy about it. So while a few states banded together to fight the law in court, Main Street folks are fighting with their feet …
Americans abandoning New York, New Jersey, other high-tax states
Fox Business News, 4/25/19
But according to our friendly neighborhood tax strategist Tom Wheelwright CPA… this is largely unnecessary.
After all, your state tax liability is primarily derived from your federal taxable income anyway.
So the secret to reducing your federal tax is less about deducting state tax than it is about reducing or eliminating your federal tax liability altogether … by carefully following the instructions provided in the tax law.
And just in case you think that’s unpatriotic and you’ll starve your deserving federal government from much needed revenue, consider this amazing admission …
“The necessity … to tax … to maintain … solvency is true for state and local governments, but not true for national government.
Two changes … have substantially altered the position of the national state with respect to financing its current requirements.
The first … is … the … central banks. The second is the elimination … of the convertibility of the currency into gold.”
This remarkably candid admission is a quote excerpted from an article titled, Taxes for Revenue Are Obsolete, which contains the transcript of a speech made by then-Chairman of the New York Federal Reserve, Beardsley Ruml.
But if taxes aren’t needed for revenue because the Fed can print as much money it wants … what ARE taxes for?
Chairman Ruml says …
“Federal taxes can be made to serve … these purposes ….
… to express public policy in the distribution of wealth and income …
… to express public policy in subsidizing or penalizing various industries and economic groups …”
So when Tom Wheelwright says the purpose of the tax code is to coerce you into doing what the government wants you to do, he’s not just making it up.
The good news is the government wants you to be an entrepreneur and investor.
They want you to start businesses and make investments in real estate and energy.
When you do, they reward you with huge tax breaks.
So much so, that when you do it right, you can eliminate virtually all your federal (and therefore state) income taxes.
And THIS is the time of year alert investors are making smart moves to capture those tax benefits before the end of the year.
Of course, as a savvy real estate investor you probably already know all about the tax benefits of real estate.
You might even be aware of how to use energy investments or a solo 401(k) to create big write-offs fast.
But MANY high-income earners don’t.
This creates a BIG opportunity for syndicators to put together tax advantaged deals to help high-taxed earners reduce their tax bills.
And if you happen to be one of those highly taxed high-income earners, before you back up the moving van, take a closer look at the tax law …
… not as an obstacle, but as a road map to reorganize your affairs to reduce or eliminate your taxes.
When you do, you’ll realize owning a business and investing in real estate are two of the smartest moves you can make.
Until next time … good investing!
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