OH NO ! Too much money !!

[Aaron Armstrong]

Haha. Just kidding. I wish I had this problem. But....

I am looking for ways to get money out of my business ( construction) and into real estate without getting pummeled by taxes.

My accountant mentioned to have the business "rent" my work vehicle from me, and to make sure I am tracking all expenses. But nothing specific to say paying for a cheap house, or maybe a down payment on a rental property.

Additional info ... I don't want the construction Corp to own the SFR, or MFR because of the liablity I run into on jobs. I do have a single family and a duplex, in my personal name currently, looking to start an entity for future purchases and possibly transfer the current into.

Thank you in advanced to your ideas and guidance.  

[Linda Weygant]

Based on your questions, I'm assuming your construction company is a C-Corp. So this advice will be tailored towards that. If your construction company is an S-Corp or an LLC, then you should be able to pull cash out as a distribution any time you want. Your accountant should know that, so because they said what they did, it would seem you are a C Corp.

There are the two traditional ways of pulling cash from a C-Corp - as increased salary (subject to self employment taxes and wage withholding, of course) and as a dividend (still taxable for income tax, but at least not taxable for self employment).  Your Corp has gets a deduction for the salary, but not for the dividends, so depending on how you structure your corporate taxes, one method might be more preferable than the other.

As a C-Corp, you've definitely got challenges when it comes to pulling cash out in a tax advantageous manner.  Renting your vehicle from yourself is an interesting concept, but ultimately not tax free.  You will need to then declare that rental income, although you possibly get a larger write off for the vehicle than you otherwise might have, however you do still have to meet the requirements of having that truck being used 100% for business, otherwise it's not 100% deductible.  If your accountant hinted that renting your vehicle wouldn't have tax implications, please check their ethics.  Sounds fishy to me.

If you have children over the age of 7, you can employ them in your business by having them wash the work vehicles, empty the trash in your home office, vacuum the home office, inventory and clean tools, etc.  (I'd keep them out of a job site though, for liability reasons).  This income is still taxable and you do still end up with self employment taxes, but you can pay your kids ~$6500 per year before they pay income taxes.  Of course the money should technically go to the kids, but I'll leave the ethics of using your children's money between you and your conscience.  This strategy can also mess up a solo 401k plan if you have one and can cause complications with other retirement plans you may have, so get with a CPA that is knowledgeable about everything you have going on before you implement a strategy like this.

You can loan yourself the money, which will allow you to pull it out tax free, however if the amount is over $10,000 you must impute a reasonable interest rate when paying it back to the company (and you do have to pay it back and document the transaction with a promissory note).

In general, C-Corps are very difficult as far as flexibility goes for the owner(s), which is part of the reason why I rarely recommend them to most small business owners.