So it looks like I made some money this year investing in rental properties. Will have to pay taxes on it unless I can increase my expenses... Any ideas for what to do today in new years eve relating to tax strategies or expenses I can write off? marketing, buy parts for some needed repairs, advertising, pay ahead for snow plowing, etc?
edit: table didn't post
Any suggestion how to reduce my taxable income?
Happy new year!
be careful that anything you do or buy is a "repair" and doesn't have depreciation schedule!
Personally unless you need things your just spending money to spend money. Don't forget if you are going to try to qualify next year for another house. Than this could hurt you!
Interesting thought.. so you are suggesting better to show more income to help with a future investment loan?
In previous years I haven't been in the black, this would be a first..
In my area, I can pay the property taxes any time between October and February. If you can, go ahead and pay any property taxes that are due. You could also go ahead and make your next mortgage payment so that you have a higher interest write-off.
Hardware/software is always a good choice, and there are usually some good deals this time of year on marketing services/tools, like http://raventools.com/marketing-software/.
joe, we are in the rapid expansion time of our business. So we need every penny of income on our taxes to allow us to qualify for the next rental. Obviously you want to deduct all your expenses, we just work hard to pinch every penny to have. As much as possible income to allow for rapid accumulation. Plus that "profit" helps fund the next rental.
Like @Elizabeth Colegrove points out, don't spend just spend a dollar to save 35 cents. Useless software upgrades have done that to many a 'sophisticated investor'. I make sure I'm stocked up on stamps (for marketing), gas in my car, maybe some light bulbs and supplies. Maybe material for an upcoming repair like you point out. Pre-paying for snow removal you know is coming anyway is a good idea, too. Talk to your plower. These are all small things and hopefully won't take much effort on your part. With an s-corp mgt co, I can establish or fund a defined benefit plan up to $30k/yr to defer the tax bite. Congrats on 'being in the black' for the first time @Joe Kato ! (No tax advice here. I am not a CPA.)
On any properties that do not have the taxes escrowed, I pay the whole year on 12/31. If they haven't calculated the bill yet (depends on the county), I just send them the amount that was due for 2013 and then figure out the difference when they cut the bill later.
As others have said, I do not create expenses to save .25-.35 on the dollar, but I will prepay known expenses. I also log into my amex and look at the total outstanding balance on 12/31 and pay that completely.
You can also pay all mortgages on 12/31 to get the interest expense. You will be receiving the rents on 1/1 to refund the cash anyways.
Congratulations and Happy New Year.
Someone already mentioned stamps; that is something that is just going to go up in the future and you're going to use them anyway (if you do marketing or sending out tenant newsletters or any other correspondence). Or other office supplies -- paper, pens, etc.
Thanks all.. I tried to call the town hall to pay taxes, but they were closed.. will remember these things next year!
I know this is a day late but I paid my state income tax's for 2014 today... that gives me a full write off on my fed tax's so for every dollar I paid today I saved 40% dollar for dollar what I will owe on the fed in April.. of course this depends on your tax bracket.
In 2013 we bought another truck, (sect 179). You can't create a loss but it can certainly be instrumental in reducing/eliminating taxable 'profit'. For 2014 we bought new equipment that will also be 179'd.
Without being foolish take advantage of every specific strategy available to your business.
Pat, Is the truck a write off because you are full time real estate? I am not yet full time, can I still write off a vehicle purchase against my annual rental income?
any new updates to this topic as we approach year end? Can I write off a work truck as a sole proprietor? Really need an upgrade..
@Joe Kato I buy mine within the LLC as did my wife & daughters within theirs. But even with a DBA you can buy a truck & 179 it for the % business usage (keep very good records) but you can't 179 deduct a currently owned personal vehicle.
Talk to your accountant & hopefully he will be aware of the nuances of sect. 179.
Any expense you have to operate your business is a deduction. You really need to get a CPA to do your taxes and advise you about these things. Your accountant will know everything about your finances and will be able to give you the best advice on tax stratiges. The suggestions you get here may not be the best for you.
I know that from personal experience. I read something here that sounded good. Went to my accountant and asked him how to include that in the deal I was doing. He said that the paper trail you needed to use that as a deduction was not worth the time and effort for what I was doing.
I'm setting up a solo 401k. You can set it up by year end and don't have to contribute until next year.
I am guessing that this post got resurrected from last year. But it Is still helpful.
I can see buying stuff you need in the next year for a write off, but I could not imagine buying something just to get a wire off. Would you not rather just set up an IRA and dump some money into it? There it can be invested, and give you the break you are looking for.
One more thing not mentioned above -- call your insurance agent and see if you can pre-pay some of next year's insurance.
Yes you are correct. Please see the following bigger pockets post for more information on this.
Something I did a few years ago: Happened to be at an auction of a yachtclub, who was auctioning off boats, for back pay of docking fees.
Bought an Etchell for $ 500 and donated it to a non-profit, that teaches teenagers how to sail.
With a letter, stating, that they would not sell the boat for the next 3 years and that the value of the boat was about $ 5.000, I was able to deduct 100% of the $ 5000 for taxes. Was worth the $ 500 to me.
Last year I had several big trees cut down in the last couple of months of the year. It's much easier to take them down proactively than to wait until branches fall on the roof or power line. I spent about 6K which I could write off and there was no damage to the houses like that might have been if I waited to see which one came down when.
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