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There are several ways can reduce the amount of tax you pay Uncle Sam? Here is a list of the most common methods to use as a tax saving tool and thus a Wealth Building and Wealth preservation tool.

Untaxed Appreciation

The value that you invest in Real Estate appreciates without hindrance unlike money you put in your bank account unless realized. Meaning, unless you sale the property and realize the gain from appreciation you are not taxed.

A Section 1031 tax-free property exchange allows you to exchange your investment in real estate for another investment property. just because this transaction is typically called a like-kind exchange, it does not mean that you have to trade a farm for a farm or an office building for an office building. Like kind just means that an investment property must be exchanged for another investment property.

This amazing -designed benefit applies only to residential real estate. It allows you take advantage of a capital gain on your personal residence as long as you have owned it for five years and have lived in it for a minimum of two years during that time. This exclusion allows $250,000 per person or $500,000 of capital gain excluded from tax for Husband and Wife.

Installment Sale

An installment sale in a nifty method of selling a property whereby you hold a mortgage for part of the proceeds of the sale. This method works for any kind of real estate. Under this provision, the percent of gain to the overall price determines what would be taxable in the sale. so if your basis is $100,000 and the value is $300,000, the ration is 100,000/300,000 or 1/3 basis and 2/3 gain. If a buyer pays you $100,000 cash and you hold a $200,000 mortgage, two-thirds of the cash down would be treated as a gainm and two-thirds of every principal payment against the mortgage balance would also be gain and taxable as gain. However, no one says you have to write a mortgage that contains principal payments. You can always set an interest-only payment schedule, which would make the gain taxable only when the mortgage is paid off. By doing this, it allows you to maximize interest income.

From Real Income

This is called depreciation in IRS lingo. Essentially, depreciation is a paper deduction of a portion of the value of an asset as it grows older and, likely less valuable. Prior to 1986 when the Reagan Administration put through the big tax law changes, this was the major reason why many people invested in real estate. The thought was to use the money that was going to be paid to Uncle Sam as income tax for the down payment on a property that would generate sufficient tax deductions to offset the investment. Because the ivestor was now an owner ofreal property with no real cost, the investment was typically very risky causing big gains. The ivnestor really had nothing to lose. Because of changes in how much depreciation can be taken, this is no longer the way to get into real estate risk-free. However depreciation still exist, and the opportunity to shelter income remains a benefit to property ownership.

It is prudent to discuss current state and federal inheritance laws with your tax and estate lawyer when you are talking about any comprehensive investment and estate planning plan. The object is to maximaize every part of your financial plan that you can. Only then can you be assured of attaining Total Asset Optimization.

Be sure to register at our blog http://leonsblog.leonwilliams.me so you do not miss any of our postings. Below is a list of posting so far in this “War On Wealth” Series. Buckle up your seat belt and hold on s you are going to get the education of your life.


Other Posts In This Series are:

War On Wealth – A Primer (Introduction)
The Accidental Philanthropist; but Uncle Sam! How Many Times Can You Tax The Same @#$% dollar?
How Not To Turn $20 Into A $75,000 Disaster
Maximizing The “Bank Of You Concept”; Setting Up Your Own Private Bank
Life Insurance As An Estate Planning Tool
Private Retirement Plans Vs. Employer Sponsored Retirement Plan Options
Special Valuations For Intra-Family Transfers, Gift Taxes And Lifetime Transfers
Why You Should Start A Personal Business?
Advantages And Disadvantages Of Investing In Annuities
How Owning Real Estate Can Help Me Save Taxes
How To Reduce Your Real Estate Taxes
Annuities, How They Work And Their Tax Advantages
The Three Proactive Strategies Of Asset Protection
Trusts – A Basic Foundation

Webinar Opportunity – Minimize Taxes, Empower your Retirement, etc..

We have a webinar on Wednesday from 12:00pm-1:00pm called: “Isn’t It Time You Became Wealthy”, in which we will teach how to minimize taxes, how to make money even in a down market, and how to empower your retirement. Register for the webinar by going to http://becomewealthy.info/leon/Webinars.html

Leon C. Williams
Financial Strategist
LUCA Financial Services
leon@lucafinancial.com
blog: http://leonsblog.leonwilliams.me
Online Business Card: http://bizcard.leonwilliams.me

Other Articles to check out are:

http://taxprof.typepad.com/taxprof_blog/2010/01/jones-war.html

http://nestmannblog.sovereignsociety.com/

http://www.dvorak.org/blog/2009/03/06/obamas-war-on-the-wealthy-is-total-bs/

http://blogs.myspace.com/index.cfm?fuseaction=blog.view&friendId=173095027&blogId=527555032

http://www.scholarsandrogues.com/2007/07/12/the-war-on-wealth-is-a-class-war-and-youre-on-the-wrong-side/

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Filed under: estate planning • Financial Services • Real Estate • War On Wealth • WOW Asset Growth • WOW Estate Planning • WOW Income Growth • WOW Taxes • WOW Wealth Preservation

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