Opinions on Grant Cardone aside (I personally have mixed feelings), he had a podcast titled "How to Rip off the IRS" that I listened to today. I'll list what he said to always do below and my concerns. ------------------------------------------------------------------------------------- 1.) Claim: Every person should be taking 9 exemptions. He said that it doesn't matter whether you have 9 kids or not. Doesn't matter if you're 18 or 88 years old... 9 exemptions. He says, "Everyone should do it. It's legal, it's alright." Concern: I'm fairly sure if you have to provide a SSN for each child when filing. I'm single with no kids, so this isn't something I'm familiar with. 2.) Claim: Create a business entity and operate from your home. Have one of your rooms set up as an office, and claim half your office as a business expense. He used a co-worker as an example. She pays $1,550 in rent. He said to make an office out of one room, pay a membership for network marketing and say that's your business, then claim about $400 a month towards that office space. He also did say to make some attempt to sell items and whatnot, but that it's good to pay $1,000 towards the "business" and be able to claim $8,000 on taxes). Concern: I honestly hate the IRS myself, but this seems borderline fraud. I honestly don't care about the ethics of it though, as long as it's legal. I'm okay with not paying more in taxes than I have to. 3.) Claim: Lease a car. He says this over and over throughout the show, claiming that if you lease a car, you can claim 100% of the payments on your taxes at the end of the year. If you pay $400 a month for the car, write off $4,800 at the end of the year for it. Concern: Not using the car for 100% business purposes. Since he's in real estate and doing deals literally everywhere, he claims all of his vehicle payments. Even said to go out and get a Lexus if you want. 4.) Claim: No refunds. He doesn't elaborate on this too heavily, just kind of talks in circles about "the federal government gets it before you" and "don't overpay the IRS". Concern: Owing a lot more than expected at the end of the year. ------------------------------------------------------------------------------------- There were some other points I'm sure I missed. Listened to it today at work, but you can find the podcast on iTunes. It's episode 240. Like I said, I'm completely fine with approaching these strategies if legal. And yes, I will contact a CPA before actually doing so. But I'd like to know your opinion. ALSO, I'm planning on starting an LLC within the next month, so all my operating expenses would be claimed through this and kept a record of through a business checking account. I'm not only operating the LLC for tax advantages, though. I'm looking to actually do my investments through it. Does anyone care to comment? Please do.

@Timothy Metra I worked in the Criminal Investigation Division of the IRS. I now own a CPA firm (a business) and my wife and I run a huy-and-hold business. Notice that we run both fo these businesses with the intent of making a profit (more on that in a few more sentences) The fact is you can TRY and deduct ANYTHING you want, but if you cant substantiate it in an audit, you will be in big trouble. I would never sign a return with this kind of aggressive borderline fraud. One of the biggest factors at the IRS is whats known as "taxpayer intent" Open a business and show no gross revenue? Taxpayer intent is not to have a profit. It is to misrepresent the purpose of the business. Here are my comments on the items you listed: • 1.If he is suggesting what I think, then this can be done. If he is saying to claim that many dependency exemptions on your W4, its ok. It just tells the withholding tables how many mouths you are feeding, and tax is withheld accordingly. More mouths: less withholding. All it does is result in the lowest amount of Fed w/h check after check. That means you get more net pay up front, but you may end up paying serious amounts come filing time, along with underpayment penalties and interest. • 2.That’s a fraud. Theres no intent to generate business income. A business by IRS standards is not a hobby if it has a for profit motive, does advertising, has necessary expenses and shows income or attempts at making income. If you say it’s a business and you know its not, that’s fraud – “a willfull misrepresentation”. And then you sign the affidavit that everything is true and correct as far as you know and its not: That’s perjury, and against the IRS, a government entity: that’s a felony offense. • 3.Need to have a documented mileage log to sunstantiate it under audit. Plus if its used in the sham business, see previous comment. • 4.This is the result of #1 – see above. The IRS assigns a rating to your return called a DIF score which is used in determining what returns will get selected for score. What this guy is suggesting would blow the DIF score thru the roof. There are other CPA's on BP besides me. Even though I seem to have more buy and hold and IRS experience then others here, I seriously believe that none of the CPA's or tax preparers on this very page would pull any kind of stunts like the podcaster suggests, and all their work is of honest intent to pay the lowest legal amount of tax. Even if BP members don't come to me, I would rather see them go to another legitimate candidate than to do this kind of risky stuff. Jim Kennedy, CPA

@Steve Babiak - Your considerations are correct and there are more, but as I wrote, I was only going for the 10,000 foot overall big picture. Jim Kennedy

How to Rip Off the IRS - Grant Cardone's advice... Legit?

Timothy Metra

OP

Augusta, GA · Member since 2017 · 65 posts · 5 votes

9y

https://www.youtube.com/watch?v=r7XNbWb0CXA

Here's the link to the podcast if you'd like to watch. Very interesting!

0 Reply

Nathaniel Busch

Certified Public Accountant · Columbus, OH · Member since 2014 · 80 posts · 75 votes

9y

Without listening to the podcast and giving Mr. Cardone the benefit of the doubt that there's more context to this than what you've listened, I would consider much of this "advice" to be fraudulent.

Hopefully he's not actually preaching the practice of claiming exemptions for nonexistent dependents or claiming office deductions for nonexistent offices. I'm sure for his sake (and the sake of his listeners), there's more context to this than just this information.

If there isn't additional context, I suppose I could credit his advice for one thing ---> it's a good way to earn yourself free housing, three square meals a day, and one hour of exercise at a free gym. And a nicely dressed man in a black robe will tell you where you'll be staying!

4 Reply

Todd Krzeminski

Rental Property Investor · Northern Virginia · Member since 2015 · 106 posts · 51 votes

9y

@Timothy Metra With respect to #1, he's saying take 9 exemption via a W-4 with your employer. This means they withhold less tax from you each paycheck. You still owe the tax, you're just putting it off until tax time -- not giving the government a free loan. And it doesn't necessarily mean you have 9 dependents. You can take exemptions for a variety of reasons, including deducting taxes on mortgage interest.

3 Reply

Natalie KolodijBusiness Member

Moderator

Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes

9y

Just a quick note: I am slammed with tax season so I'm sorry I can't go into this more- basically this guy has some good ideas, but he's playing kind of fast and loose and I wouldn't sign off on his return.

Your EXEMPTIONS are what you claim on your w-4. It determines how much of your tax the government will withhold. The Higher the number, the less they take out.

What this means: sure, claim a 9. You will then want to sit down with a CPA/EA and do tax planning / make quarterly payments to ensure that you don't end up owing a ton at year end. BUT the benefit is YOU have your money during the year, not the IRS. By allowing them to hold more and getting a refund in April you're basically giving them a free loan.

You can keep/use that money yourself, but it should involve careful planning by a professional.

It's unrelated to your dependents, which you report on your tax return.

Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies

Kolodij Tax & Consulting

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7 Reply

Timothy Metra

OP

Augusta, GA · Member since 2017 · 65 posts · 5 votes

9y

@Natalie Kolodij thanks for taking time to reply out of your busy schedule! So does the w-4 make a difference in terms of what I'm paying? Like will I go from paying (hypothetical example) $5,000 in taxes on a w-2 and getting a $1,000 refund at the end of the year to keeping all my money and paying $4,000 at the end? But being able to possible pay less? I'm just assuming that if I put up quarterly chunks of money like you said, at the end of the year, they should be more than enough to satisify what I owe in taxes at the end of the year.

I'm also a little concerned with the vehicle. I know of people who have leased a 2017 work truck fully loaded and are doing 100% claiming with it, and ALSO leasing a claiming a 2017 Mercedes, but they put that one as a leisure vehicle to not draw any red flags.

0 Reply

Natalie KolodijBusiness Member

Moderator

Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes

9y

@Timothy Metra The IRS has underpayment penalties. If you look into those it will give you an idea. So if you didn't pay in any all year then just paid with your taxes, you'd have penalties. Thus the quarterly payments in.

Ya the vehicle is sketchy. I wouldn't take 100% of the lease payment at all. Rarely is that the case. For many of my clients it does work out better to just buy a vehicle because of that fact.

Also, The home office thing you can't just ....decide your expenses. Certain expenses are qualifiable, and it's based on an allocation of office sq ft vs. total house square feet. That being said. If you have a 2 bedroom house and 1 bedroom is 500 sq feet and one bedroom is 100 sq feed there's nothing saying you can't make the 500 sq foot one your office. It just has to only be business use and not much else. I tried having a client take their whole lower level of their house because sometimes they met with clients at their dining room table, okay but do you also eat dinner there? Then it's personal use.

But if you have a huge room and you wanna put a huge desk in it and then have a better ratio of bills be a business expense go for it.

Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies

Kolodij Tax & Consulting

Website View Page

3 Reply

Jana CainPro Member

Enrolled Agent · Richmond, CA · Member since 2016 · 225 posts · 148 votes

9y

@Timothy Metra In a grand, very very general sense, he's technically correct.

1. You do not have to provide SSN's for the number of exemptions you are claiming, so yes, you can ratchet your withholdings up to 9 if you so choose. 10 had been the cutoff for when things start to look fishy, but that's not *entirely* the case anymore. The reality is that it is smart to adjust your withholdings such that come tax time, you don't owe (or owe close to nothing), and you don't get a refund (or a very tiny one).

2. Forming a business is great way to rack up [legally deductible] expenses (including the home office deduction), but you have hobby loss rules to be mindful of moreso than the home office expense. To look like a business, you should be showing a profit for 3 of the past 5 tax years. Taking substantial losses *might* work for years 1 and 2, but you generally can't do that every year. Also, the IRS loves to take a closer look at Schedule C filers, so beware of heightened scrutiny there. The home office rules have changed (there are now two options for calculation). You are correct that the example given is more than a little NQR (not quite right).

3. Auto deductions are based on business use of the vehicle, plain and simple. Per another thread that surfaced not too long ago, some preparers take more liberties than others in calculating allowable mileage. 100% usage isn't unheard of, but it's certainly not a given, real estate pro or not.

4. The typical argument against refunds is that a tax refund means you've given the government an interest-free loan for a year. I have a client that aims for a refund every year (they use it to pay their property taxes!), despite understanding the validity of this statement. I say "to each their own" on that one. Some folks just can't be reasoned out of it. :-)

So that's my gross generalization take as an EA. Bottom line is you'll want to work with a qualified tax pro of your choosing to sort this stuff out for your specific situation. If you opt to go the DIY route, at the very least please refer to IRS.gov first for any questions. As you can see, it's way too easy for bad information to send folks in the wrong direction.

1 Reply

Thomas Graham

Investor · Oklahoma City, OK · Member since 2016 · 48 posts · 31 votes

9y

I've always heard it said that tax avoidance is desirable, tax evasion is illegal. A lot of these strategies sound like tax evasion. I'd be extremely cautious.

3 Reply

Jim KennedyPro Member

Accountant · Cherry Hill, NJ · Member since 2016 · 173 posts · 201 votes

9y

@Timothy Metra I worked in the Criminal Investigation Division of the IRS. I now own a CPA firm (a business) and my wife and I run a huy-and-hold business. Notice that we run both fo these businesses with the intent of making a profit (more on that in a few more sentences) The fact is you can TRY and deduct ANYTHING you want, but if you cant substantiate it in an audit, you will be in big trouble. I would never sign a return with this kind of aggressive borderline fraud. One of the biggest factors at the IRS is whats known as "taxpayer intent" Open a business and show no gross revenue? Taxpayer intent is not to have a profit. It is to misrepresent the purpose of the business. Here are my comments on the items you listed:

1.If he is suggesting what I think, then this can be done. If he is saying to claim that many dependency exemptions on your W4, its ok. It just tells the withholding tables how many mouths you are feeding, and tax is withheld accordingly. More mouths: less withholding. All it does is result in the lowest amount of Fed w/h check after check. That means you get more net pay up front, but you may end up paying serious amounts come filing time, along with underpayment penalties and interest.
2.That’s a fraud. Theres no intent to generate business income. A business by IRS standards is not a hobby if it has a for profit motive, does advertising, has necessary expenses and shows income or attempts at making income. If you say it’s a business and you know its not, that’s fraud – “a willfull misrepresentation”. And then you sign the affidavit that everything is true and correct as far as you know and its not: That’s perjury, and against the IRS, a government entity: that’s a felony offense.
3.Need to have a documented mileage log to sunstantiate it under audit. Plus if its used in the sham business, see previous comment.
4.This is the result of #1 – see above.

The IRS assigns a rating to your return called a DIF score which is used in determining what returns will get selected for score. What this guy is suggesting would blow the DIF score thru the roof.

There are other CPA's on BP besides me. Even though I seem to have more buy and hold and IRS experience then others here, I seriously believe that none of the CPA's or tax preparers on this very page would pull any kind of stunts like the podcaster suggests, and all their work is of honest intent to pay the lowest legal amount of tax. Even if BP members don't come to me, I would rather see them go to another legitimate candidate than to do this kind of risky stuff.

Jim Kennedy, CPA

8 Reply

Michael T. Breen

Plaistow, NH · Member since 2016 · 9 posts · 7 votes

9y

IRC 9722 states that if the principal purpose of any transaction is to evade or avoid liability under this chapter, this chapter shall be applied (and such liability shall be imposed) without regard to such transactions. In English, this means if the transactions doesn't have a business purpose and true economic substance, the transaction or entity creating the tax savings will be disregarded for tax purposes and the correct tax will be imposed. If you google US Tax Court Sham you will see many tax court cases that cite sham with no economic substance and disregard the entity or transaction. There is a variety of civil penalties that can be assessed based on the facts and circumstances of a particular tax scheme. There also is the potential of a criminal matter with the US Department of Justice-Tax Division.

1 Reply

Andrew Johnson

Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes

9y

Timothy Metra Most of the time when I listen to anything around taxes/IRS I just use it to create a list of questions to ask the accountant that we go to. 9/10 times whatever idea is spouted doesn't apply to us or "skirts the edge" of what's permissible. Personally, I don't like to play on the edges. If I'm entitled, I take whatever deduction and can and do aim to maximize it. But making business decisions based on tax implications is far different from creating an LLC purely to enable a fictional home office for a tax deduction.

1 Reply

Wes Brand

Investor · San Francisco, CA · Member since 2016 · 314 posts · 153 votes

9y

Giving him the benefit of the doubt and liberally interpreting this: "He also did say to make some attempt to sell items and whatnot, but that it's good to pay $1,000 towards the "business" and be able to claim $8,000 on taxes)."

He's saying create a business selling stuff, try to make a profit at it, but you probably won't because you're paying for an office and membership to a professional network and that's ok. Or, to rephrase, if you were to create a business attempting to flip items on ebay where you buy low and sell high, but you don't get very good at it (just buy stuff that moves and take a small loss constantly), and you use your home office for the purposes of that business, and pay a membership fee in some "ebay flippers" group, you'll probably pass an audit. I think he's right, since you're actually creating a business and attempting to run it for profit. But...

Is it worth the work of running a business to write off a few thousand on your taxes? You've still spent the money, so it's not like you're saving that much, you're just getting a 10-30% discount on it. Is it worth the loss of personal space to begin with? No idea, but probably not. Further, if you lease a car for the above mentioned 'ebay flipping' business and you use it to drive to craigslist ads to get the crap you're trying to sell on ebay you can write off your lease payments. But you need to substantiate it in an audit. Here's the ad, here's the mileage log, etc. Is it worth keeping those records to save a few hundred a month on your taxes? And you then can't use it for personal things (or you can, but be prepared for more paperwork)

1 Reply

Ben Zimmerman

Rental Property Investor · Raleigh, NC · Member since 2016 · 393 posts · 995 votes

9y

@Timothy Metra Grant Cordone is both a genius, and an idiot, depending on how you want to view things. The first thing you should understand about what he is trying to do, is that unless you are making a ton of money, your chances of being audited is on the grand scheme of things very, very low. He uses this fact to his advantage because every year that he doesn't get audited, is a year in which he basically pays nothing in taxes. He pushes the law so far, knowing that even by pushing the limits he probably won't be audited and thus he will get away with it. And on the off chance that he is audited, he just has to be able to justify his taxes enough so that it's not deemed criminal tax evasion. Otherwise he simply pays the IRS what he should have owed them in the first place, plus possibly a small fine. Over the course of many years, if he is audited twice, but he gets away with it 48 other times, then financially that is a huge success because what he saved is dramatically higher than what he had to pay out in fines. This is easily summed up by the old expression, "It is easier to ask forgiveness, than to ask for permission".

As for your four bullet points.

1. Nine exemptions: He isn't saying you should claim 9 dependents on your actual taxes on Apr 15th, (that would be fraud), he is saying you should claim 9 exemptions on your W4. All this is doing is reducing the amount your employer withholds on a monthly basis in taxes. This means that at the end of the year, you may end up owing the IRS money, however his whole goal is to do other creative things in order to reduce his tax bill enough so that this doesn't happen and he doesn't owe anything. Most people claim 1 exemption for themselves, plus one for each dependent, but the form does specify that you are able to adjust this based on "projected tax credits".

4. No refunds: This is out of order but it ties into point 1. Getting a refund at the end of the year, means that during the year you OVERPAID on your taxes, this generally happens by not claiming enough exemptions on your W4. This means that essentially you gave the government an interest free loan for one year. Instead of the government holding onto that money all year long just to finally give it back to you, you could have invested that money into an investment account earning additional interest or returns.

2. Business deductions: Owning a business is probably the single best thing you can do as far as taxes are concerned. Although he doesn't dwell on it, he does say that you should try to get the business to succeed, but even if it doesn't its still beneficial because you can now claim many things as business expenses, and also have access to the wonderful home office deduction. Buying a new computer? -Call it a work computer and write it off as a deduction. Do you have a cell phone that you also use for business use? -Write off a percentage of that too, along with a part of your internet bill for that new computer of yours ect. A home office deduction can be huge as well. Because now you can write off a percentage of your electric bill, rent, heat, mortgage, depreciation, certain repairs ect or take the new simpler deduction based on the sq footage of the office.

3. 100% car deductions: Please reread my intro statement for this bullet point, because by claiming a 100% deduction he is basically daring the IRS to audit him. If they do he will attempt to justify it (maybe he gets it to work, maybe he doesn't), and if they don't audit him then he gets away with it by default. Depending on your particular line of business, a very high % could be completely appropriate and still not be obnoxious like the 100% is.

Many of his tactics stretch the law to their limit (100% car deduction), and would be frowned upon ethically. But what is ethical and what is technically legal are not always the same thing. You did mention that you were less concerned with ethics however, and more concerned with what is strictly legal so some of this stuff may work out for you although I would still suggest toning it down one notch. I would highly suggest educating yourself on some of the finer points of a few of his tactics by reading publications put out by the IRS (they actually have some pretty useful stuff that everyone can understand). Because you first have to be familiar with the specifics of what the law says, in order for you to know how to properly bend that law to your advantage because often times the devil is in the details, and as always consult a real tax professional.

1 Reply

Steven Hamilton IIPro Member

Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes

9y

Deductions in context. These are exaggerated and do not always apply. I would run from that advice.

[email protected]224-381-2660

1 Reply

Timothy Metra

OP

Augusta, GA · Member since 2017 · 65 posts · 5 votes

9y

@Wes Brand thanks for your input! I was actually forming a legitimate LLC, though. I'm planning on doing a spec build in my local area, so I'm not truly playing with fire in that portion. He's also big into real estate which involves a lot of driving (driving for dollars, trips to Home Depot, tenant issues, meetings with banks, etc) and he said to go ahead and claim 100% on the nice Lexus you lease because it would be hard to audit over. I already have a car paid off that's a little older and is starting to get some of it's more mechanical issues, so the idea of getting a lease is appealing because I can write it off as a business expense, but it would also be a legitimate one too. I would use it for those purposes and I have an old Corolla right now. It's been reliable for me forever, but it would be nice to lease a nicer end car and have that success vibe to me when meeting clients and whatnot. And on a side note, I can afford it extremely comfortably. I don't have any debts. Half of one paycheck (I get paid weekly) will cover all my bills. So I have 3.5 extra checks per month that bring home about $1,100 each on average. So I could afford upgrading to a nicer lease, I was just curious on the legalities of claiming it as an expense at the end of the year

0 Reply

Timothy Metra

OP

Augusta, GA · Member since 2017 · 65 posts · 5 votes

9y

@Ben Zimmerman that first sentence was hilarious. I think he's super smart but tends to talk in circles sometimes and gives off the guru vibe, but overall I think he has a decent mindset with this certain topic. I also don't think my chances of being audited are high at all. I mean even if I claim a lease is 100% business purposes. I have a second car (paid off but older) that I can claim as my leisure vehicle. But it would be very nice to be able to lease into an upgrade, have that successful vibe when meeting clients and whatnot, and being able to write it all off at the end of the year.

1. Thanks for the clarification. My only concern with this is not knowing how much I should put away quarterly in order to pay my taxes at the end of the year. But it still does sound appealing honestly.

4. The no refunds part is also appealing. I'd rather have more money throughout the year. But I'd like to make more money throughout the year, then pay a little or get a small refund towards the end. I pay about $350 a week in taxes on average. So I'm thinking if I go 12 months without paying that, my owing will be astronomical. Which I would put money off to the side to take care of that, but still. I'd prefer a happy medium if possible.

2. I'm definitely planning on running a legitimate LLC, so I plan to do everything you just said!

3. I understand 100% is sketchy, but he said to go ahead and do it because the IRS is after the people making $40k a month, not $40k a year. I'll probably end up doing about 90% to play it safe, though. But again, the idea of having a super nice lease and being able to claim 90% on taxes will be a very nice upgrade for me and I think will help the business in terms of emulating success to clients. I'm not hit with the "shiny object syndrome" where I'm just trying to buy a nice car, though. I think it would be a legitimat ereason to lease a higher end vehicle.

0 Reply

Timothy Metra

OP

Augusta, GA · Member since 2017 · 65 posts · 5 votes

9y

@Jim Kennedy awesome response my friend, thank you. I'm definitely not looking to do anything borderline illegal, but I'm. definitely not trying to pay more in taxes than I need to. On the podcast he said to do the whole online business deal, but I'm actually planning on running a legitimate LLC. Me and my father are doing a spec build locally and are running the project through our LLC. I have an older car that's paid off, but it's starting to need a little work here and there. I was considering doing a lease on a nicer car to give off that vibe of success, but also be a win-win because my current car's reliability AND being able to claim it at the end of the year. I would probably end up claiming about 90% when it's all said and done. And owning a real estate business obviously involves a loooooot of driving so I Thought it would be pretty easy to justify. I'm also opening a business checking account and ALL of my business related expenses would go through it. The only thing that wouldn't is my houses utitlities and office space, which I would do seperately. Any negative views on this?

0 Reply

Jeff Filali

Rental Property Investor · Broken Arrow, OK · Member since 2016 · 1k+ posts · 1k+ votes

9y

For those considering purchasing or leasing business vehicles or any business equipment, you need to research Section 179 of IRS Code. With the 50% bonus depreciation, you can use this to your advantage if you need to have a huge write-off in one year. Even if you are financing the purchase, you may be able to depreciate the purchase and take the deduction in the year purchased. Word of advise, buy SUV or Truck weighing over 6,000lbs and you'll see more savings then passenger vehicles. Section 179 total deductions limits up to $500,000 per year. Also, used equipment or vehicles qualify for partial write-offs. Anyone in any business for themselves, should become very familiar with Section 179 rules.

2 Reply

Timothy Metra

OP

Augusta, GA · Member since 2017 · 65 posts · 5 votes

9y

@Jeff Filali that's awesome. So I can claim depreciation on a lease? I was considering leasing a GMC Sierra.

0 Reply

Jeff Filali

Rental Property Investor · Broken Arrow, OK · Member since 2016 · 1k+ posts · 1k+ votes

9y

Consult a CPA, I'm not giving any advice, just sharing the info. But honestly, IMO why lease when you can buy and still write it off. Section 179 used correctly can drastically reduce the cost of purchases. For example, if you're in a 28% tax bracket, a $100,000 in qualifying purchases would end up really only costing you $72,000 because of the $28,000 in taxes that you would have paid on that income. A CPA can advise you on this, but even if you're financing that $100,000 over multiple years, you may be able to deduct the "full purchase price" in the year of purchase, even though you only paid a portion of it. Again, I'm not a CPA, but I like to understand the laws. In business, there are LEGAL ways to reduce your tax burden.

What Grant Cardone is saying is partially right, he's just a little bit over the top and could get people in trouble. Due your own due diligence and seek a CPA's advice.

0 Reply

Timothy Metra

OP

Augusta, GA · Member since 2017 · 65 posts · 5 votes

9y

@Jeff Filali I think when you lease a car, it can be depreciated and then your monthly payment is determined off that value. Like a $40,000 truck as a purchase is always going to go off the $40,000 because that's the lien. But when you're leasing, you can claim that $40,000 has depreciated to (hypothetical example) $20,000 and your lease payment would be based off the $20,000 value, not $40k. Which makes it cheaper and cheaper. I think that's how it works. And I'll end up talking to a CPA before I pull the trigger on aynthing of course

0 Reply

Timothy Metra

OP

Augusta, GA · Member since 2017 · 65 posts · 5 votes

9y

@Jeff Filali

From the GMC website:

"Customers keen on driving a new car every few years or wish to reduce the size of a down payment may prefer to opt for a lease.

Leases essentially allow customers to pay for the portion of a vehicle they use over the term of the lease, which typically runs between 24 and 48 months. Lease payments are calculated based upon how much the vehicle is expected to depreciate during the length of the lease.

For example, if a $40,000 vehicle is worth $20,000 (also known as the residual value) after a lease term of three years, a monthly payment will be based off the $20,000 difference instead of the entire purchase price."

0 Reply

Timothy Metra

OP

Augusta, GA · Member since 2017 · 65 posts · 5 votes

9y

@Jeff Filali but maybe I'm reading that completely out of context.

0 Reply

Jeff Filali

Rental Property Investor · Broken Arrow, OK · Member since 2016 · 1k+ posts · 1k+ votes

9y

@Timothy Metra Of course GM wants you to lease... They make more money!! I prefer to buy myself, same as renting a home vs. buying.

0 Reply

Jim KennedyPro Member

Accountant · Cherry Hill, NJ · Member since 2016 · 173 posts · 201 votes

9y

@Timothy Metra

Staring a business for a legit purpose? Now there's a concept worth looking into.

Before everybody gets hyped about writing off their lease, lets review how to write off your vehicle expense. There are two ways to write off auto expenses: what is the actual method and the other one is the mileage method, and the basic concept will pretty much match whatever you thought when you read those words.

before I dig in, this is not tax advice. Do not rely on it because I do not know the unique facts and circumstances to your particular tax return. While all tax returns are the same, all taxes are different. They are the same in that we all use the same forms and schedules, and they're all different because the two of us have the same facts and circumstances. There are a few other points of the tax code that I don't have the time to get into. This commentary is basically a view from 10,000 feet, okay? Good. Let's do it:

In the mileage method, you track your miles in a logbook, day by day, or you use an app like mild bug or something else. (there are other ways to but again were working from 10,000 feet here) The problem with the apps is many of them are free, but only for the first six months. Anyway, you take your total business miles that you track and you multiply them by the applicable rate, which Congress changes every year to adjust for inflation. For example, in 2015 the rate was 57.5 cents per mile. Gas prices came down and for 2016, the rate is 54 1/2 cents or so. So, if you drove, say 10,000 miles for business that you had documented in your log or app, it would be that many miles times the applicable rate, and you would have a deduction of about just under $5500.

The actual expense method, you track all the actual expenses of the car. Hey Jim, does that include tolls? No. It only includes what happens inside the car. Tolls are separate. I'm talking about gas, oil, tires, battery, wiper fluid, etc. etc. So you track all your receipts, and total them up. Then you can take an allocable portion, and the allocable portion is a percentage. The percentage is the number of business miles traveled by the total number of miles. If you drove 10,000 miles, and 7000 were business, and 70% of all your actual expenses would be deductible. That you would depreciate the car or truck also. That he would do the same thing with the lease payment.

So either way you are supposed to track your miles. Yes there is a 90 day rule what you can develop a representation of three months and then annualize it, but the IRS can always challenge that. They cannot challenge a logbook as far as total miles.

Unless you are leasing a Cadillac Escalade and paying $3600 a month for the lease, and almost every single situation I've seen as a CPA filing tax returns the mileage method is more beneficial. It also involves less work and less tracking. I don't just save my clients money, I also try to help them save time to.

There is one more little loophole that makes the mileage method more attractive. In the first year that you place your vehicle in service, if you elect the mileage method, you can that flip-flop back and forth to whichever is more advantageous for you. For example if you do that, and then in a future year you have to replace the entire transmission and spend a ton of money. If this board bandits for you to take the actual expense percentage, you can!

Jim Kennedy, CPA

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How to Rip Off the IRS - Grant Cardone's advice... Legit?

How to Rip Off the IRS - Grant Cardone's advice... Legit?

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