Business Management

5 Savvy Tax Moves to Make Before December 31st

Expertise: Commercial Real Estate, Personal Finance, Real Estate Marketing, Business Management, Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing
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The deadline is looming. What smart tax saving moves will you be making before the end of the year?

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Winning the money game is as much about minimizing taxes and avoiding wasting money as it is about investing for gains. If you stop the waste and stop overpaying on taxes, you’ll keep more and have a lot more to invest. Here are 5 ways to do that in the next few weeks. Obviously, seeking personalized advice from a CPA is highly recommended. And to be transparent, I am not a licensed tax professional. So please do not take this as professional tax advice.

Contribute to Self-Directed Retirement Accounts

Are you missing out on the tax savings and bonus returns provided by tax protected retirement accounts? Contributing to your 401(k) and IRAs can lower your annual tax burden. By rolling over into a self-directed plan, you can choose your own investments, i.e. real estate. Then your gains become protected from taxes and are able to snowball your returns and wealth. Make sure you are maxing out your allowable contributions before the deadline is up.


Related: Tax-Saving Strategies for Real Estate Investors: How to Pay Less & Keep More This Year

Pre-Pay for Business Items

If you need more deductions and write-offs, look for ways to spend now for what you will need next year. The upcoming holiday sales are an excellent way to compound these benefits by getting what you need for less — and gaining more breaks. This can apply to office supplies, travel, marketing, subscriptions, and related services. For example, maybe you want to redesign your real estate website, but haven’t finished the specs yet. Pay for it and get it started now. You can still polish it in the new year.

Make New Investments

The above also applies to making new investments. Invest bonus money, self-directed IRA funds, and other surplus funds into new investments before the end of the year. If you have liquidated or are planning to sell other investments, then find out about the tax savings a 1031 exchange might offer. I personally do not like seeing too much of my personal capital sitting in the bank. I put it to work in order to make more.  


Related: The Most Flexible & Tax Efficient Way to Structure a Partnership


Real estate investors really shouldn’t be investing without an LLC, S Corp, or other entity to protect their privacy and minimize their tax burden. Too many put it off and then expose themselves to higher tax liability by trying to transfer assets later.

Get Your Accounting in Order

One of the biggest areas of loss for real estate entrepreneurs is failing to keep their books organized. They don’t record all of their expenses and miles. Use all the apps you can to close this loop. You’ll save on tax preparer fees and get the maximum deductions. This is a task I would recommend delegating, as I’ve stated before. Upwork is an excellent resource for finding someone to handle this.

Investors: Which of these tasks will you be performing? Anything you’d add to this list?

Let me know with a comment!

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling w...
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    Zahrah McFadgen Investor from Menands, New York
    Replied almost 4 years ago
    Great article Sterling! Is a 401k the same as a self directed retirement account? If not, can I transfer my funds from the 401k account to a self directed account? Thanks!
    Sam Bates Rental Property Investor from Dallas, TX
    Replied almost 4 years ago
    Zahrah, 401(k) plans are employer sponsored plans while self-directed IRA/Roth IRA plans are managed by the individual. Self-direct IRA’s allow you to invest in any asset classes that you desire. The large brokerage houses typically handle 401(k)’s for employers so they offer limited mutual funds, bonds, or ETF’s for CYA purposes. If you have a 401(k) from a previous employer you can roll it over to an IRA. If the 401(k) is at your current employer unfortunately you cannot move it until you leave the company. If you are self-employed another good option is a solo 401(k). The contribution limits on a solo 401(k) are much higher than an IRA and you can still direct which investments you want to invest in. Two self-directed IRA companies that are well known are Equity Trust and Quest IRA. I personally use Equity Trust and haven’t had any issues with them.
    Ezichi Oha Wholesaler from North Hollywood, California
    Replied almost 4 years ago
    Good article, good timing too. I will incorporate
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    Glad you found value in the content. What was the biggest takeaway for you, Ezichi?
    Abraham Rahmanizadeh Investor from Denver, Colorado
    Replied almost 4 years ago
    Sterling, Thanks for a great article! Few questions below.. If we are looking to finance properties how does the incorporating come into play? Every time I’ve talked to a lender they always say if the asset is held in an LLC financing is something that they either just won’t do or will require a significantly higher downpayment and a much higher interest rate which doesn’t seem to make financial sense. Wouldn’t an umbrella insurance policy or something along those lines make more sense? I’d love to learn more about the topic because when I first started I wanted to take the LLC approach but after talking to lenders it just didn’t seem something that was achievable without sacrificing significant flexibility when it comes to financing. Thanks! Abe
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied almost 4 years ago
    Those are all great questions. I would highly recommend posting them in the forums. Someone with more experience in that niche will be able to further assist on the matter, Abraham. Hope that helps.
    Jeff DeLeon
    Replied almost 4 years ago
    Thanks again Sterling. You should consider writing a book…