10 Year-end Tax Tips Every Real Estate Investor Must Know

10 Year-end Tax Tips Every Real Estate Investor Must Know

July 6th, 2009 |

Author: admin

The countdown from Thanksgiving to Christmas is a magical time of year but its also a warning to real estate investors that December 31 the end of the tax year is almost upon us. If you havent yet gotten your financial house in order youre running out of time to gather your records and do some lastminute planning to minimize your tax burden. The good news is if you start now you still have time to save yourself some money on the tax bill youre going to have to pay in April. Here are 10 great moneysaving tax tips that will put a warm smile on your face regardless of the temperature outside.

1. Home Office Deduction If youre new to real estate investing you may not be aware of this timeless treasure that the IRS makes available to you. By setting up a dedicated workspace in your home you can deduct much of the costs of doing business if you work out of your home. In addition you can proportionally write off some of your living expenses such as mortgage interest utilities and telephone expenses.

2. Mileage Deduction Skyhigh gas prices will really save you money at tax time. Youll be able to get some of these expenses back but the standard rate will vary depending upon when you were driving for business. For the half of the year ending June 30 the deduction is 50.5 cents per mile. Starting July 1 and going to the end of the year that rate increased to 58.5 cents per mile.

3. Educational Expenses Did you decide you just had to pick up that investing course book or CD set that claimed it would put you on Easy Street in no time? Good news. Its deductible as long as your purchase was designed to expand your business opportunities.

4. 401K Conversion Did you finally decide it was time to fly solo? If you quit your job this year you can convert that 401K plan thats getting beat up by Wall Street into a selfdirected IRA. Not only will it save you money it will also free up valuable dollars you can use to invest in even more real estate all with Uncle Sams blessing.

5. Selfemployed Health Insurance One of the biggest challenges faced by selfemployed real estate investors is how to pay for health insurance once you leave the relatively safe ranks of the employed. This deduction can save you a bundle because insurance premiums are very high.

6. Charitable Contributions Do you love that warm fuzzy feeling you get inside when you spread around some of your hard earned cash and its not being caught by a Washington politician? If thats the case give to your hearts content while enjoying a sizable IRS tax deduction.

7. 1031 Exchange This moneysaving tip can save you tens of thousands of tax dollars over the course of your real estate investing career. When you sell a property for a profit you would normally get hit with a substantial capital gains tax. This technique allows you to defer your tax penalty indefinitely until death if you like. Use the 1031 exchange to defer taxes youd otherwise have to pay. While its true that you cant take it with you why should you take the taxes with you?

8. Charrissas Mortgage Secret This technique seems devious but its an entirely legal way to reduce your tax liability. Your mortgage payments are probably due on the 1st of the month. By paying them a day early not only can you save a days interest but you gain the benefit of being able to deduct an extra month of mortgage interest. How much can you save with this technique? How many properties do you have?

9. Charrissas Stalling Technique If youre planning on selling a property in December you can save your capital gains liability by delaying the closing until the new year. While not as beneficial as the 1031 Exchange it still allows you to delay paying the tax for a full year.

10. Early Payment Discount Will you owe state and local taxes this year? You have two choices: Pay them in January and wait a full year to take your deduction or pay them in December and deduct them next April.

You may be wondering what to do with some of your tax savings. Thats really your call. You can use it for investing in another redhot property or you might put it to good use as an extra nice Christmas gift for that special someone in your life or you might even opt to perform a random act of kindness for someone less fortunate than you. If you play your cards right you might be able to do all three.

Whatever you decide enjoy doing it. Smile knowing that the money youre spreading around is being spread by you and not being squandered by your Uncle Sam.

About the writer: Charrissa Cawley has a long standing reputation for excellence as a gifted speaker real estate trainer and wealth coach. She offers accurate and proven strategies to investors of all different levels and is the founder of www.reiconferences.com and www.rewexclub.com.