BiggerPockets

And by far, is income taxes. I know there are tremendous legal methods how to not pay income taxes, or to pay very little. Judge Learned Hand(his real name!) once said in a court case " it is the right of every American citizen to arrange his affairs in the best manner possible to pay as little in income taxes as possible."
What are some of your ways to accomplish this? If you can bypass or overcome this obstacle, you have a real chance of creating wealth in this country. Remember, income is not wealth. Think about it. This is the 4th obstacle. You can find the other 3 on the Blog page. I'll give my ideas on this subject at a later time. Lets' see some of the other ideas. Rich in Fl.

Some thoughts:

- If you want to pay $0 in taxes, expatriate yourself. You will pay no taxes (in this country, at least). Or you can move to another country, start a business, and then the first $150K of your income (or something around that) is tax exempt in the U.S. Of course, I don't think this is a reasonable plan for most Americans.

- If you have a lot of cash, buy tax-free municipal bonds (bonds issued in the state you live or in a state that has no income tax).

- 1031 Exchanges will allow you to defer taxation for as long as you'd like.

- Give gifts to your heirs. Up to $12,000 a year can be given tax-free, to help reduce estate taxes later in life.

Very Good...Votes for both.

I also believe having a very good accountant/tax guy is critical.

As some of you know, I work for the railroad. It's the "real" job. I used to use a very well-known tax-preparer in my area. One day I was told of another ex-railroader, who is retired, has been doing guys taxes for years, which has led to a nice little post-retirement tax service business. AND he's owed rentals in the past.

Ron is VERY knowledgeable ;) with all the deductions we are entitled too. We are out of town a lot, and are "compensated" tax-wise with certain deductions. My other tax-preparer never mentioned them, I don't think she knew they exsisted. It was a significant amount of money.

He's late 60's early 70's, on a quess. As long as he's around, I'll be a client. Having him personally own rentals in the past, was a BONUS for sure. He's really made things easy.

Excellent thread!

So far my mode of tax planning has involved all of what Will said with regards to utilizing a business entity. I have an s-corp. Not only do I write off EVERYTHING that is remotely related to the functions of the business to reduce tax liability, I also don't pay Social Security tax on a corporation. That can be huge.

Of course, my business function is real estate, so that's a "gimmie" for creating future wealth.

I'm not too diligent about investing in the IRA. Honestly, I've let it sit rather stagnant since (as of late) I feel I can get a better return in real estate than in the stocks, mutual funds, etc. which comprise the IRA.

My accountant is excellent. She consistently gives advice to reduce my tax liability. Although, I have never asked her what she pays in taxes! I will next time I see her though!!

The primary area that I'm lacking is with 1031 exchanges. I haven't done one and don't know much about them.

"I'm not too diligent about investing in the IRA. Honestly, I've let it sit rather stagnant since (as of late) I feel I can get a better return in real estate than in the stocks, mutual funds, etc. which comprise the IRA."

Mark, have you considered rolling your IRA in to a self-directed IRA so that you can use it for real estate? There are IRS rules to navigate around, but several here on BP are doing it.

"My accountant is excellent. She consistently gives advice to reduce my tax liability. Although, I have never asked her what she pays in taxes! I will next time I see her though!!"

I asked my CPA that question and he said exactly what I thought he'd say; "none of your business." Crusty guy that we've been with since 1993. I'm sure he pays very little in tax.

Originally posted by Rich Weese

Jon- My guess is your acct doesn't want to tell you what he pays in taxes because he pays TOO much. He would be proud to tell you, if the amount was small, imo. I posted an in depth post on this subject in the blogs. Check it out and review it for me. Rich.

I expect one of these days he'll say "remember when you asked me what I pay in taxes? I paid $xx last year." He is the type to repond negatively, initially, until he's had time to think about whether or not he wants to answer and what he wants to say.

Example: I told him about what you are doing, and his knee jerk reaction was "he's cheating." However, after listening some more he acknowledged that you could be legit with the IRS. Just his way.

Mark, have you considered rolling your IRA in to a self-directed IRA so that you can use it for real estate? There are IRS rules to navigate around, but several here on BP are doing it.

EXACTLY! And I am one of them. They key is knowing which investments are the easiest and most profitable without the time and efforts, somewhat turn key. In my opinion, the best way to use self-directed money for investments is for making loans secured by RE. A buy and hold scenario is much more complicated, has a ton of rules and regulations to follow and you lose a very powerful reason for RE investing - depreciation deductions. Since your IRA is already tax deferred, you miss out on the depreciation. You also have limited leverage abilities, which is the second most powerful reason to invest in RE. YOu must use non-recourse loans and they require a minimum of 30% down and the costs, fees, and terms and less desirable.
If you own a SDI, my suggestion is to make loans with it. You get 10%+ in interest with no headaches or managerial responsibilities, and no ongoing monthly requirements. (Just my opinion!)

Rich,

I sent my accountant this link:
http://www.biggerpockets.com/blogs/575/blog_posts/2749-obstacle-4-the-largest-wealth-eliminator-taxes-

I'll have to wait and see what he has to say. Thanks for the ideas.

Thank you to all who voted for my first post, now that is what I call activity!
Just TWO more and I hit 10.

Wow, that might be a first - where a reply to the thread has out-voted the original post, AND they both hit 10 votes. Great thread, and great to get the feedback as well (IMO).