Wealthy Real Estate Investor Rob Rowsell teaches his secrets on how you can reduce tax drag. Maximize your investments and avoid tax losses the way rich real estate investors do. Learn the secrets in part 2 of this 2 part series!
Reduce Tax Drag On Your Investments Today
After wrapping up Part One of the Reduce Tax Drag series, Rob segued into the next two tips.
Set Up An LLC And Pay With Pre-Tax Dollars
Rob introduced the idea of Paying with Pre-Tax Dollars. This means you should push all legitimate business expenses to your business. This way, you will get an automatic discount. Business owners need to set up an LLC in order to run those expenses. When you’re a W2 employee, you pay taxes at the end of the year, and hopefully get a return from the government. LLC business owners can take out expenses on a lesser number. This means getting money back for deductions like fuel and your office utility bills. Robert Kiyosaki details this in his bestselling book Rich Dad Poor Dad.
Plan BEFORE You Play So You Can Reduce Tax Drag
As Rob has stressed many times over, you must Plan BEFORE You Play. Meet regularly with your tax strategist or CPA, so they are in the loop about your investment plans. Make sure your accountant knows your strategy in advance, so they can fill you in on the potential tax impact. This isn’t always fun, but the pain in order to potentially save and invest $50,000 instead of paying it in taxes is worth it.
Join Our Community
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!
Wealthy Real Estate Investor Rob Rowsell is here today to share his ultimate tax saving secrets in part one of this two part series. Let’s all watch and read on to learn the first two out of four tips. Do you want to make the absolute most out of all of your investments and avoid the scourge of tax drag? Well then, this is the series for you! Let’s go!
Rob’s Tax Saving Secrets Revealed, 1 and 2
Rob starts off by defining the often discussed concept of “tax drag”. Tax drag is the wealth draining resistance that taxes can make on both your investments and your earnings. Not only can it cost you cash today, it can also rob you of potential future compounded earnings from all of those lost dollars.
How can you as an investor get ahead of this disturbing trend? First off, you will need to start meeting with your accountant on a regular basis. Specifically, scheduling a September meeting with them to report the financial moves you’ve made thus far in the year is a great idea. Once your CPA is aware of those moves, then they can help you formulate strategies in the remaining three months. These strategies will help you to minimize the taxes you will owe at the end of the fiscal year.
Save On Taxes By Emphasizing Structure Over Deduction
The first of Rob’s tax saving secrets we will discuss is Structure Over Deduction. All of us will look for deductions when it is tax time. If you are not also structuring how your money is handled during all twelve months of the year, then you will not need to lean so heavily on those deductions in April.
One example of this strategy is to make sure that you pay yourself tax efficiently. Rob’s financial advisor once estimated that he should be earning a salary in a wide range. By paying himself on the low end of that proposed dollar range, Rob is being conservative monetarily. Remember, when it comes to paying your own taxes, you are in charge. You are the quarterback on the field!
Rob Defines The Concept Of Tax Rate Arbitrage
Tax Rate Arbitrage is another one of Rob’s favorite structuring tools in his tax saving secrets toolbox. Rob decided at one point that he would form a management company structured as a C Corporation. That C Corp received a fee from both his real estate and automotive repair businesses for the services that they rendered. The C Corp was taxed much more efficiently than any of his other businesses were. Therefore, he saved himself money on taxes all around. Entities such as a C Corporation exist for just two reasons: in order to protect your assets, and to save you money on your taxes.
What Does It Mean When You Plan Your Exit Before You Go In?
Another essential financial structure strategy is when you Plan Your Exit Before You Go In. In the real estate business, most investors’ end game is an obvious one. You may have a written three to five year plan in place for your multi-family property investments. Whatever amount of money you choose to invest in each of them will help your tax advisor to give you the best advice. That means he or she will show you how to structure your businesses to save on taxes.
Tax Saving Secrets Continued: Invest Your Saved Taxes Efficiently
Rob continued with a game changing hack that you can apply today! Savvy tax planning is the absolute lowest risk way to immediately boost your return on investment. That strategy means knowing what your investing end game is. Savvy tax planning also includes deciding which wealth bucket you will be investing money from.
Generally, your long term capital growth investments will go straight to your taxable accounts. This is because they are not taxed at the government’s highest rates. “Ordinary income” cash flow investments will go in tax advantaged accounts instead. Rob used an example from his own investment history. He once made a short term loan to some house flippers in his investing network. Since he used a sum of money from his own Roth IRA account, he was not taxed on the loan amount. Also, the returns from that investment could go right back into his retirement fund. That way, those returns could continue compounding.
Conclusion: Money Saved On Taxes Is A Revenue Stream
Remember, all of the money you save on taxes can be counted as a revenue stream! Once again, tax drag is the polar opposite of a revenue stream. It is lost income from the annual taxes that you pay. What if you had not paid those taxes? Then you could have made compound returns by investing those funds over a period of time.
Join Our Real Estate Investment Community Today!
Have you invested in multi-family rental properties? If not, do you aspire to do so one day? Then you should definitely consider joining our online discussion group, the ATL Inner Circle Community! Each and every month, Rob Rowsell will teach you what you must do so you too can build wealth in the real estate business. It is not as easy as it looks! Property taxes, liens, and legal fees can all be hard to navigate. Therefore, having a successful guide in your corner like Rob is a must! Sign up today!