myEmpirePROIn this lesson, you will discover 3 tips you need to know about taxes paid when flipping houses.
The first thing I want to tell you is that I am not an accountant or a CPA.
So as soon as you start making money,
…make sure you talk to a certified CPA and take advantage of the tax laws in your state.
Whatever part of the world you’re in, there are certain laws that you can leverage and take advantage of if you know or get with a CPA that knows.
With that being said, I want to share 3 tips with you.
1, Capital Gain Taxes
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When I make money in flipping houses, it’s considered capital gain.
“Capital gains are the profits from the sale of an asset — shares of stock, a piece of land, a business — and generally are considered taxable income.”
It’s considered taxable income especially if the acquisition and sales both happened within the same calendar year.
But if the sales of a real estate happens another calendar year after,
There are certain tax loopholes that your accountant or CPA may be able to enlighten you on to save money on taxes.
But I don’t really look at that.
I don’t worry about how to save money on taxes until later,
which is after I make sure that a percentage of every penny I make is set aside for two things.
- To invest back in to the business
- To pay taxes
After investing back into the sustainability of the business, the money left is pure profit.
Then I simply preserve 50% of that until I pay taxes.
2, Depreciation Tax Benefits
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When you flip houses, it’s a little different from when you hold on to a house to rent out to people.
So when you buy-to-hold real estate, which we discuss heavily in REAL ESTATE MONEY SECRETS which you can download for free at www.RealEstateMoneySecrets.com
…you have certain tax advantages that come with the fact of depreciation tax laws when in fact the property value is more likely appreciating.
The tax laws allow you to write-off taxes as if your property is depreciating down to $0 value by the 27th and half years.
The IRS basically assumes that your real estate property is useless by 27.5 years even though it is increasing in value historically speaking.
It’s like double income into your life, when you learn how to buy and hold on to real estate; in addition to the potential cash-flow.
But if you’re buying to fix and to flip back into sales, meaning you just wanna collect $30,000, $40,000, $50,000 and keep it moving,
that’s just capital gain which is considered taxable income.
It’s just like trading shares at the stock market; you are expected to pay income taxes on your gains.
But again, the business is still worthwhile as long as you make sure that you’re running this as a real business.
3, When To Worry About Taxes
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Talk to a good CPA once you start doing deals consistently or after closing your first deal.
Many people get stuck with trying to figure out the technicalities of taxes prematurely.
They haven’t figured out how to to generate leads.
- How to collect data.
- Generating the contact information.
- How to generate leads.
- Turning that to contract; and then
- Close deals.
Those 5 stages are the most important things for you to master because there are no taxes to pay on ZERO income or losses.
Your skills and mastery in the 5 stages processes are much more important than taxes and setting up LLCs especially in the short term.
In the long term, of course, you want to make sure you have your legalities in order
So you don’t end up paying more than your share in taxes or in a tax evasion lawsuit.
But in the short term, the first thing is to learn how to generate leads.
That’s the first, and that’s something that we cover extensively in the books.