2020 Trump Tax Analysis
A New York Times report that President Donald Trump paid just $750 in federal income tax the year he entered the White House - and, thanks to colossal losses, no income tax at all in 11 of the 18 years that the Times reviewed - is raising doubts about President Trump's self-image as a shrewd and successful businessman. My goal is to provide some behind the scenes perspectives that can help explain what you can do as a taxpayer to take advantage of all the loopholes available to you.
1) Tax Savings deadline: April 15TH is your tax filing deadline and only has to do with compliance. December 31st is your tax savings deadline and has to do with pro-active tax planning to reduce your tax liability before the year runs out.
2) Hire a good tax accountant: You can either pay the IRS or pay a good accountant who thoroughly understands your business and works for you, not the IRS. They are able to find legal loopholes to reduce your tax liability.
3) Various types of Income: The type of income that you receive determines the type of tax that you will pay. There are three types of income: earned income, passive income, and portfolio income. Earned income consists of income you earn while you are working a full-time job or running a business. Note that "running a business" does not include a rental real estate business in most cases. Passive income is income earned from rents, royalties, and stakes in limited partnerships. Portfolio income is income from dividends, interest, and capital gains from stock sales. Earned income is the highest taxable income.
4) Net Operating Losses: Losses from prior years can be used to offset income in the current year.
5) Rental losses: Rental Income is probably the only income that is allowed to be reduced with paper expenses such as depreciation. It is very possible to generate a lot of rental income but have no taxable income due to depreciation or accelerated depreciation and cost segregation.
6) Business deductions: There are a lot of deductions such as mileage, solo k, health premiums that are available to business owners but not available to employees.
7) Non-taxable income: If you own assets that generate portfolio income and passive income, it's possible to access the equity in those assets through loans and lines of credit. Proceeds from a refinance and line of credit are non-taxable income.
8) Information pandemic: There is a whole of information and misinformation out there. When NYTIMES says that Trump only paid $750 in taxes, they are not really providing an accurate picture because Line 56 of the tax return is not the final tax due line. Line 63 is and prior to Line 56, there are a lot of credits available based on the type of income generated and where generated that can reduce or wipe out your tax liability.
9) AMT: It's possible to not have regular income taxes but still have what is called Alternative Minimum Taxes. This means that there are certain deductions that high-income earners are not able to deduct even if they are in the tax code
10)Taxes Due: There are seven different types of taxes that the government collects in order to take care of their budget: Income Tax, Payroll Tax, Property Tax, Sales Tax, Inheritance tax, Gift taxes. Understanding the different types of taxes available can be very valuable in financial planning.
WHY WORK WITH ME?
As a new or seasoned real estate investor, are you getting the best tax advice? Let me evaluate your financial and tax situation, then develop a customized tax strategy just for you. Together, we will come up with a strategic plan designed to answer your questions as you build your own customized wealth-building plan.
I am not just your average CPA. I am also an active investor. My reputation has been built through years of experience and innovation in creating tax strategies. By offering tax compliance and planning for top real estate investors all over the United States, I know what the rich are doing to create, protect, and preserve their assets. All of us have a responsibility to pay tax but none of us should pay more than our share. The tax laws are complex. Most of us do not have access to the kind of information that will allow us to use these loopholes that all taxpayers are entitled to. My personal goal is to educate individuals and corporations on how to keep more of what they make.
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