First year expensing of business assets. With Section 179 first-year expensing, you can receive an upfront write-off of up to $25,000 all in one tax year to fully write-off business personal property such as computers, printers, scanners copiers, faxes, office furniture, fixtures, etc. In a 40% bracket, $10,000 immediately saves you $4,000 in taxes. .

First year expensing cannot be used for personal property (appliances, carpets, furniture, etc.) in residential rental properties. However, it can be used for personal property in commercial property and personal property associated with any type of investment real estate (residential or commercial). Examples are: computers, faxes, furniture, etc. used in a home office to manage properties. Also included here would be equipment such as trucks, tractors, trailers, lawn mowers, snowmobiles, tools, and laundry machines.

Family members on payroll. Convert a non-deductible allowance into a deductible expense by hiring family members. What can your child, grandchild, niece do? Distribute flyers, mail runs, answer the phone, cleaning, work the computer, recordkeeping, etc. The tax benefits are excellent as demonstrated by this example.

Example: If your total tax bracket is 40%, paying your young child $4,000 in salary you reap tax savings of $1,600, while the child does not owe any income taxes. (PLUS: The child can still set up a Roth IRA).

You can pay baby family members for pictures in ads and set up a Roth IRA. Start funding the IRA when the child is a baby, and start a college fund. Start from age 1, invest $2,000 a year for 17 years in a Roth IRA until the child is 18 years old at 10%. By the time the child is only age 18, the Roth IRA would accumulate to over $ 81,000, which is a good start for a college education. At this time, early IRA withdrawals used to pay for college expenses are not subject to the 10% penalty. Also, the contribution portion of Roth IRA withdrawals is tax-free.

Family "Fringes". Once family members are on salary they can be provided with certain deductible fringe benefits (that pay for a lot of living expenses that you would still have to expend cash for). Examples are auto, entertainment, travel, insurance plans, retirement plans, "cafeteria" plans, Medical Reimbursement Plans, etc. There are three tax advantages to fringes: (1) You can fully deduct them as a business expense. (2) Family employees do not include them as income and (3) Many are not subject to other withholding taxes.

Some of the above are excerpts from The Real Estate Investor's Goldmine of Brilliant Tax Strategies, A Tax Reduction System And Special Forms Software Package, by Albert Aiello.

Source: Realestatelink.net

 

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