Need tax shelter ideas

8 Replies

So we did our first (non owner occupied) flip this year, paid cash, and had an offer 5 days after recording. (And here I am complaining--right!!) Needless to say, it went way way faster than I had penciled out and now my 2017 tax forecast is out of control. (Darn it, made too much money for the calendar year.) I need creative ways to shelter about 150k. I need to be able to access the liquid funds in the immediate future to keep flipping. Write-offs for lower tax brackets are good...but I need more ideas! I'll keep looking here, but hoping some new strategy might be out there

Thx!

Hi Laura, I know this is an older post, but curious as to if you had any luck?  I'm searching for ideas as well as we may be in a very similar situation with that type of "good problem!"  Sounds like you all did it right!

@Jesse Palmer ,  

  • The first major step to save taxes would be electing S-corporation for your business entity. 
  • If this was Laura number she would save 15k right off the start.
  • Also hiring kids transfer money to avoid tax. If you pay your kids around 19k in 2019, they will pay no tax on that 19k. ( assuming they would contribute 6k to IRA in 2019). If you have multiple kids, there you go - no more tax :).
  • There are other ways for S-corp to save taxes such as providing educational assistance ($5250) to your family member and deducting it in the corp. Employee relationship needs to be established. 
  • Profit sharing plans in the S-corp can shelter around 60k of income.  

And much more. Explore around here and talk to your tax planner. 

Thanks so much for the great information! We are pretty new to REI so I sincerely appreciate your time and advice! My kids are 7 and 3 but where there's a will there's a way!

Gratefully,

Jesse Palmer

Originally posted by @Shadonna N. :

@Ashish Acharya could kids be replaced for other family members (ex: parents, uncles , cousins). What if you are simply an LLC and it is too late to create a S-corporation.

 It’s never too late to elect S-Corp. You can also retro actively elect up to 3.25 years, but you had to file as a-Corp (or not file at all)during those year without properly electing an a Corp. 

If that’s not the case,  you can still elect to file as S Corp for 2018 while you file your return this due date.

 The whole reason we want to hire own kids is to shelter overall family’s tax. it’s works because the income stays within the family with no tax. 

If you hire other family member money doesn’t stay with your family /tax return. 

You can hire your other family members but they will pay the marginal tax of their own or not pay tax if they are under the threshold. 

So if you were actually paying your parents for their living expenses, then it makes sense to hire them and pay them through the business so you get to deduct the expenses and also pay the parents at the same time. And If calculated properly, they might owe zero taxes too.

It takes planning to achieve all these.

Originally posted by @Shadonna N. :

@Ashish Acharya thanks for the quick response.  Can you share more on the S-corp.  Does it matter if you are a passive investor.  If you elect S-corp once do you have to continue the election moving forward?

Can you first please share your investing activities?