With yesterday’s victory of Barrack Obama, one thing is certain: Taxes will rise. Whether you like him or not, Obama has no history whatsoever of cutting taxes (despite his promises). Expect more of the same.
That’s the reason for this post. I want to begin a discussion about best ways to minimize your own tax burden.
(Note – President-Elect Barrack Obama has flatly stated that you are selfish if you want to minimize your taxes. So if you’re a supporter of Mr. Obama, please disregard this content, as Obama does not support it. But reasonable people certainly do.)
This post is not going to be highly detailed. All I’m going to do right now is give you a few topics to research and begin to consider. Further, I will do further research on these topics and provide more information to you as I discover it.
A few general ideas for you to think about for minimizing (or at least, delay) your tax burden are as follows:
- Sell any appreciated assets right now, before tax increases are instituted
- Use proper corporate structuring enabling shifting of profit from one tax year to the next
- Use of self-directed IRA’s and Solo 401k’s for tax-advantaged transactions
- Use 1031 exchanges when selling qualified real estate and defer taxation until more favorable taxation environments exist
- Convert as much of your income into lease-based (and other passive) income rather than active income
Clearly this list is far from complete, and there are no details included yet. I’ll work with you to provide more details in the near future. In the mean time:
Please share your thoughts below about general tax reduction strategies with which you are familiar. Please don’t bother sharing the details yet – just give us an idea of how your strategy works. I’ll use your comments as source material for finding further details and provide the information to my entire readership.
Again: please share your tax-reduction tips below…
Thanks for reading RealEstate.BryanEllis.com.
Well, He was not my choice as well, and I am pleased that he did not take my state in the election, but for the people that have low moral values, dont care about the word of God, and dont care if taxes go up to support those too lazy to work for themselves, they got their man. As far as how I will protect myself from taxes, I will make sure I set up my assets in trusts, and the use of properly structured corporate entities.
Your right we need to start taking action now before he is in office. Democrats always raise taxes.
Just as I’m getting ready to jump back into real estate, this election happens. I so appreciate your comments and look forward to learning more about how to financially survive this administration. As one who aspires to be over and above the ever-shifting “middle income” numbers quoted by the Obama followers, I find it suddenly so disheartening to even try to be financially successful because I see anything deemed as excess profits or “selfish” earnings to be swept away and given to those that would never have anything anyway.
Advice for the new investor would be especially helpful. Perhaps it is time to consider off-shore investments in order to avoid the punitive taxation that is no doubt on the way to those of us making money in the good ol’ USA.
After reading a previous post, I must say that ObamaJoeBiden flatly disagrees. Obama thinks it’s his duty to raise ALL taxes, enlarge government, destroy the middle class, and create a welfare society because he thinks this makes equlity possible. Joe Biden has stated it’s patriotic to pay taxes. And the 2 of them, along with more democrats in the senate and house, will bring back the Carter years and then some. The (ignorant)American voters have spoken, and they did so to be a part of something”historic”. I firmly believe we get the kind of government we deserve, and I for one am going to enjoy watching America get its come-uppin’s courtesy of the left.Who would have thought we could forget Ronald Reagan so quickly and re-embraced the failed Jimmy Carter(not that McCain was any Reagan, but certainly better than Barry O)? But this is what happens when republicans are as bad and weak as democrats, and think they need to ingratiate themselves with “moderates and independents”. That never works, and McCain hardly deserved the republican nod, much less victory.The greatest nation on earth, a God-fearing republic, has now moved tremendously toward godless,hopeless socialism.Get ready to be reeducated by the school of hard knocks.
Good timing, Bryan, I was awake most of the night thinking about this issue. Any and all strategies well be helpful. It’s time to be pragmatic and go into survival mode. I agree totally with your outline so far. We need to move swiftly and thoughtfully.
Any new deals I enter into will be structured with little to no capital at risk (as usual), will have short-term exits, or if long-term, have terms that make the coming major downturn survivable.
I also believe that there will come a time later in this new administration that there will be distressed property/seller deals that will make today’s bargains look hugely overpriced. The big challenge will be how to acquire and profit from those. Never a dull moment, eh?
Some of us are working on deals that, pre-ObamaNation, would have allowed us to retire, and after a lifetime of hard work, we can’t afford to redistribute our hard-earned profits to whoever/wherever underachievers the government wants to support. Apparently, we’re not in a free-enterprise America anymore. I personally am now finding myself in a race to getting a major project completed and sold, in the face of an economy that is going south as new taxes and massive spending commence, which will make it impossible to find buyers. Our best hope is that the media will soon trance the public into believing that the new administration has magically cured all our economic woes, and then we can get some business completed before things get to where they (media) can no longer conceal the reality from the public.
But enough ranting, let’s get pro-active and defend ourselves with every resource available. I am confident that the core community on this blog will do what we always do, and that is survive, find or create solutions and work-arounds as needed to achieve success. It’s what we do. That’s what make this country great, and will continue to, no matter what they try to do.
Well stated, Tom! — Bryan Ellis
Hi All,
I am not as worried about the taxes as some other liberties we will quickly lose if the Dems have their way but with that stated I am worried about taxes.
There will be a big push to take most tax advantages away from small to medium sized businesses, like ourselves very quickly. We don’t have the political muscle or lawyers to protect us so we are the lowest hanging fruit right now.
After they get us screwed into the ground they will move on to the bigger companies. Look for the real and hidden tax rates to quickly climb over 60% probably higher. Also look to being taxed on gross instead of net profit. I see this coming very soon.
My suggestion is to look off-shore! It is becoming more popular and I see more people looking into this and doing this in the last few months.
I am not suggesting evading taxes this way, would never do that, but there are some ways to shelter some of what you make and legally keep the tax man away.
For those companies big enough we will see a very large streaming of money off-shore. I know of at least one friend of mine doing this as we speak and we are talking some large money. After all this isn’t the only country that buys and sells real estate.
Anyone interested can look at what FDR did for the economy and realise he really intensified the depression and greatly lengthened it. Obama will likely do the same if he has his way.
I do see one really good things for us happening already though. The strong politcal infighting amoung the Dems has already started and with any luck this will stall most of what they want to do. Hard to get work done when you are chewing on the next guys leg while he is chewing on yours.
Thanks for the time,
Chris B
P.S. For any not aware the next shoe to drop will be credit cards. Most banks are already taking away credit lines. If it hasn’t happened to you yet it will very soon, like before Christmas most likely. Be sure to check what your credit balances are and do this before you purchase a big item. Many people are being declined at POS and then call to find out no credit left. This will make the housing problem look like a cake walk.
McBush supporters can thank Mr. Bush and Co for that fraternity style paddle spanking the Republican party took on a national level.
Not you party liners, but the rest of us are living with all the hallmarks of a recessing if not depressed economy…high unemployment, deflating dollar, shrinking consumer confidence and its cousin poor retail sales, a TANKED real estate market…many are now licking their wounds, including real estate investors.
Fear all you want, but the fact is that the economy soared under the last administration in office, leaving a surplus to crash and burn under the current one.
The sooner you get over the fact your boy and his eye candy would be VP lost, the sooner you will find the opportunities that exist in this new administration.
So then shall we assume that you’re opposed to people structuring their affairs to minimize taxes? That is, after all, the topic of this post. — Bryan Ellis
Good going Bryan, you are onto somethong with raising this subject at this time. I recall a book by Carlton Sheets called “More Money IN Your Pocket” back in ’86 which analyzed the best ways to keep more of your RE profits. While the tax structure then makes his book out of date for today, you probably have a best seller in you on this one with a little research, I know I would buy it.
I am an Obama supporter, so I am probably not welcome here, as I must be a baby killing, gun taking, wealth redistributing commie socialist liberal. Actually, I am somewhere just to the right of the center – I believe in the death penalty, I support the right to own a fire arm, I believe that abortion is between the woman that makes the decision and her God. And I believe that it is our duty as Americans to seek to minimize our taxes. There are many legal ways to minimize taxes – I think trusts are the simplest and maybe the most effective, but I’ll be checking back to get more ideas. My goal is to get to the point where they WANT to tax me to death… in other words, I want to make a lot of money, even if it means I have to dance faster to keep it. That’s the problem I want to have.
I remember when Clinton took office – I heard all the same moans and groans about the world coming to an end – the most liberal governer in the world, he is going to take all our money, he is going to take our guns, blah blah blah. Here is what will happen – if Obama moves quickly to raise taxes – I believe someone here made the claim that they will effectively move into the 60% range – the mid term elections in 2 years will fix that problem. I believe the key is to never allow one party to have an overwhelming majority – remember, Obama can propose new taxes, but Congress has to agree. And right now, the Dems do not have that overwhelming majority. And our government can’t move fast enough – even with those arch fiends Pelosi and Reid in charge – to raise taxes that much in 2 years.
By the way, the reason I voted for Obama is that I think it is time we had an intelligent, well read, steady hand in office rather than another reactionary gunslinger. I supported the McCain of 2000; his pandering to the far right (along with the choice of Palin) pushed me away. I think all of you will be surprised by the way Obama governs.
Ok, bring on the hate…
No hate here, Kevin. No hate anywhere on this website. There is a fair amount of disagreement and debate, both of which are vastly different from hate. — Bryan Ellis