Millionaire property investor Rob Rowsell’s CPA explains how real estate investors can benefit from discretionary expense write-offs. These tax deductions are key to legally avoiding paying too much in taxes and fees. Pay close attention to this tax advice, and remember: Saved taxes is another income stream!
What Qualifies As Discretionary Expense Write-Offs?
Discretionary Expense Write-Offs can benefit Property Investors immensely. CPA Kevin Bassett starts the clip by explaining that deducting Owners’ Discretionary Expenses (ODE’s) is one of his favorite tax strategies. Others refer to it as Perks or Grateful Expenses.
Next, he presents his one page form on pre-taxing your lifestyle. When he starts working together with a new client, they fill out this form. The client does this in order to determine which of their expenses are deductible.
Kevin’s Top Six Discretionary Expense Write-Offs
- Company Vehicles and Work Trucks
- Home Office Space
- Home Internet Bills and Other Office Expenses
- The Augusta Rule (See Below)
- Shareholder Meetings
- Putting Your Spouse and Kids on Your Payroll
Regarding shareholder meetings, Kevin mentioned that this deduction is fairly straightforward if they are in US territories. Why not hold your shareholder meeting on the beach in Hawaii, since it’s tax deductible? Kevin recommends putting your spouse on payroll, in order to double your IRA deduction. Also, he pays his kids the IRA limit of $6,500 annually to work in the office. He invests the money in an account to meet everyday needs when they go to college. He also contributes to a 529 account for their tuition, and deposits into a pre-taxed Roth IRA for their retirement. The earlier you start investing, the more the interest will compound.
Kevin went on to expand on writing off your home office. When you invoke the Safe Harbor Rule, the IRS will not audit this deduction. Using this simplified deduction, you can write off $1500 on your home office space. This is based on $5 x 300 square feet. Benefits include no depreciation recapture (no gains when you sell your home on that 300 square feet), and no need for you to itemize. Let’s say you have two businesses in your home, each in a different room. For example, you and your spouse both work from home. You may be able to write off both home offices. Check with your CPA to confirm this.
The Augusta Rule
If you work from home, the IRS allows you to rent your home out for up to 14 days tax free. Your S-Corp (not an LLC) can pay a rental fee to use your home office for meetings, and you may deduct that amount. The amount you charge can be a fair market rate based on hotels and AirBNB properties in your area. Many companies will use the Augusta Rule by hosting quarterly meetings and their annual Christmas party in home.
Finally, Kevin reminds us to be thorough when listing our companies’ discretionary expense write-offs. However, don’t be greedy. After all, pigs get slaughtered.
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Do you own multi-family properties? If not, do you aspire to one day? Then you should consider joining our online discussion group, the ATL Inner Circle Community! Each month, Rob Rowsell will teach you what you must do in order to build wealth in the real estate business. It’s not as easy as it looks! Property taxes, liens, and legal fees can all be hard to navigate, so having a successful guide in your corner like Rob is a must! Sign up today!
