What can I do with profit to “hide” it from immediate taxes

Question

I have had profitable years in the past and have paid a significant amount in taxes. This year will be more profitable than before and I’m working to gain the knowledge to help me not continue to just stay on this path if I can be proactive. I am a certified builder in Florida and build under my company name then sell my spec homes for profit along with custom builds throughout the year. I also own a STR company where I have built in one and legally moved it to the “inventory” for my other company at cost to rent out for cash flow. The third company handles the employees and manages books and logistics for the other two. I’m in the 34/37% range this year and need some strategies to possibly keep my hard earned money.

Account Closed · Answer

It's great that you're looking for strategies to optimize your tax situation and keep more of your hard-earned money. Here are some tax planning strategies that may be relevant to your situation as a builder in Florida with multiple business entities:

• Entity Structure: You already have multiple companies, which is a good start. Properly structuring your businesses can help optimize your tax situation. Consult with a tax professional to determine if your current business structure is the most tax-efficient for your situation.
• Cost Segregation Study: If you own and develop commercial or rental properties, a cost segregation study can help accelerate depreciation deductions by breaking down property components into shorter asset lives. This can reduce your taxable income and, therefore, your tax liability.
• Section 179 Deduction: This deduction allows you to expense the cost of certain types of business equipment and property, potentially reducing your taxable income. Consult with your tax advisor to ensure you're maximizing your Section 179 deductions.
• Qualified Business Income Deduction (QBI): If your businesses are organized as pass-through entities (such as LLCs or S corporations), you may be eligible for the QBI deduction, which can provide significant tax savings. This deduction is subject to certain limitations and phaseouts, so work with your tax advisor to ensure you qualify.
• Tax Credits: Explore tax credits that may be applicable to your business, such as energy efficiency tax credits for your construction projects or the Work Opportunity Tax Credit for hiring employees from specific targeted groups.
• Rental Income Planning: Managing your short-term rental (STR) business is essential. Properly accounting for expenses related to the STR can reduce your taxable income. Make sure to keep accurate records of expenses related to your rental property.
• Employee Benefits: Consider providing tax-efficient employee benefits, such as retirement plans, health savings accounts (HSAs), and flexible spending accounts (FSAs), to your employees. These can reduce your overall tax liability while helping you attract and retain talent.
• Real Estate Professional Status: Depending on your level of involvement in your real estate activities, you might qualify as a "real estate professional" under IRS rules. This status can allow you to deduct real estate losses against your other income.
• Hire a Tax Advisor: Given the complexity of your business operations, it's crucial to work with a qualified tax advisor who understands your specific industry and can help you implement tax-saving strategies.
• Regular Tax Planning: Conduct tax planning sessions throughout the year to keep track of changes in your financial situation and to make adjustments as needed.

Remember that tax laws and regulations change, so staying informed and regularly reviewing your tax strategy is essential. Tax planning is highly individual, and your best approach will depend on your specific financial circumstances and goals. Always consult with a tax professional who can provide guidance tailored to your unique situation.

Rick Pozos · Answer

If you are making a bunch of money every year, buy rental properties. Namely bigger ones that you can do a cost segregation on and depreciate quite a bit in the first year. You not only lower your taxes, you have a retirement of rental properties in the end.

Jodey Rifenburg · Answer

Thank you Account Closed. I’m really that new at these items. I’ve been in business for almost 5 years and I just make money and pay taxes. This year I have a better idea of how much that will be so I am now starting to look so I definitely appreciate your suggestions. I brought these items up to a CPA in my area and luckily I didn’t sound like I just had no idea as to what I’m looking to accomplish. I’m researching all of your items individually to see which ones will pertain to me and my businesses. Thank you again!

Jodey Rifenburg · Answer

@Chris Seveney thank you for your response but we can only be as good as the circle of people we have on our team or we must learn more. I’m okay paying some taxes, as it is part of the right of passage to make money, but I’d like to know if there are more defined options. There are financial advisors but not everyone in this forum have a dedicated financial advisor or one that we think we can 100% believe they have all of our best interests in mind. From my understanding, in a 1031 exchange I have to rent out a new construction or remod and show income to qualify, which could be a possibility, but it is only an option for some funds to have tax deferred. What happens when your profit is over $700k to 1m…I can invest into a ULI after tax or my $68k max to my SEP pre taxed…but what secrets are we supposed to know after we have done all of those things? I do not mind researching new suggestions or talking with someone you have experienced that have helped make you successful in decision making on things that mater specific to reinvesting into yourself or others that can help make less of a tax burden. It seems to be on the news all the time so I am just trying to learn the “kept” secrets.

Chris Seveney · Answer

@Jodey Rifenburg

1031/DST, oil and gas investment or something with a lot of depreciation.

Of course speak to your financial advisor / CPA

What can I do with profit to “hide” it from immediate taxes

Most Popular Reply