I agree with you; however, I must say that arranging your affairs in a position that benefits yourself might be an area that will allow you to save on your tax bill.
I firmly agree to not spend just to not have it taxed. I don't know if you have seen my comments on mortgage interest.
@Jon Holdman is correct on this matter. So I must guess that you do not have any other source of income personally aside from a spouse.
You may deduct the costs of a vehicle if that is what you use to visit your properties.
As far as not being about to do a 1031(Like Kind Exchange), You most definitely CANNOT; this is because the property is a flip, you have said so yourself and your holding period will indicate this as well. A flipping activity classifies you as a dealer. Your other properties may be eligible; however, anything related to a flip is not. Short term capital gains are taxed at your ordinary rate anyway so this will have no effect; you benefit from it not being a capital transaction(which would disallow mileage and many other deductions).
In your situation a work truck may be more appropriate; however, your S-corporation could purchase it and just include the value of your personal miles in your paycheck.
By having the corporation purchase the vehicle you will be able to depreciate it: For the first year the maximum for passenger vehicles is: 11,160 For trucks and vans it is 11,360, and for SUVs over 6,000lbs it is 25K. There are various other provisions related to vehicles; however, they can be one big benefit.
It is VERY distinct that if you operate a business you must pay taxes when you profit from the merchandise you sell. It doesn't matter if you have more rentals than you do flipping, you are still generating ordinary income.
@Kama Ward, does bring up a very good point; however, the first rule of making money is to not lose money. don't lose future profitability for a tax savings now.
You could also rent it for awhile; however, the IRS has determined that if someone who is flipping a property rents out their inventory they 1. cannot take depreciation 2. must pay SE tax on the proceeds.(since it is in an S-corp you avoid this).
@Ed Lee, new vehicles are limited in how much you can 179 the first year.
Also if you build a temporary building, that may be eligible to be treated as 5 year property. Consider something like a mobile home on skids or a modular movable building. It will also qualify for bonus depreciation.
-Steven the Tax Guy
Your guide to IRS laws, rules and regulations.
Steven Hamilton II, Hamilton Tax and Accounting
E-Mail: [email protected]
Telephone: (224) 381-2660
-Steven the Tax Guy
Hamilton Tax and Accounting LLC