As a real estate professional in Detroit, MI, money is often on your mind. What can I do to keep as much money as possible? How do I work around my taxes? Are there other options outside of placing it in a Swiss bank? Let’s go over a few ways you can properly and safely strategize money handling in real estate!
Do You Own Your Home?
If the answer is yes, then congratulations! You’re already one-step ahead of the game! Your home is a great shelter for your taxes, as you’re now receiving benefits from homeownership. Additionally, if you’re looking to sell your home for a profit, there is a way out of getting extremely taxed. If you make $250,000 or less in profit, the IRS will not implement a tax ($500,000 if you’re married). However, you do need to make sure you’ve utilized this property as a primary home for 2 years (in a 5 year bracket).
Do You Invest Your Money?
The options for investing are unlimited in Michigan, and now with new crowdfunding techniques implemented by Governor Rick Snyder, your opportunity to invest in local businesses has increased! However, real estate investments provide you with immediate opportunity for cash flow. Additionally, that home you just purchased is already started to depreciate, and will allow you to create deductions on your next tax payment.
Have You Utilized A 1031 Exchange?
The 1031 exchange, or a like-kind exchange, is set up for real estate investors who are looking to purchase multiple properties and not get hit with taxes. The 1031 will push back your taxes on the first home you purchased, and move it to a new property. More specifically, taxes on capital gains can be avoided by moving the money over to the newest property you own. Once you’ve decided to sell the second home, you can keep this momentum moving on the next Detroit property you purchase. See the pattern? Avoid the taxes completely by having one property right behind the other.
Have You Registered As Business?
It may just be you venturing out solely into the real estate world, but that doesn’t mean you’re not still a business entity. We don’t necessarily mean you have to file for a Corporation or LLC, but for tax purposes, your real estate expats are business related. Regardless of how much time you put into real estate a week, you are able to deduct a portion of your supplies and necessities to get the job done. Don’t forget about your car, phone, home office, and any home improvements you may have made over the years, as a tax deduction.
There are several different ways to keep your money safe from those nasty taxes. Always make sure to inquire with a professional tax advisor to see what other areas can help to keep the tax many away!