All Forum Posts by: Clayton Coombs

You’ve gotten a lot of short term ideas that will help. It sounds like you’re quite successful at flipping houses so I would suggest that you continue to focus on that. I don’t agree that buying rental houses is the best idea though. You’d need a ton of them to offset your flipping taxes and that would create a whole new set of problems. It takes a lot of time and effort to buy that many properties and then there’s the management of it all. It may solve your problem partly because dealing with the portfolio would cause to divert attention away from flipping and you’ll see your income drop as a result. I’d recommend that you find some good multifamily syndicators to align with that are long term hold guys and invest in their deals as a limited partner. You’d get the tax breaks you’re after as a passive investor and at some point you’d not even need to flip to generate $250-300k in income. And that income would not be taxed as aggressively as your flipping income.

Ive pulled my money out of my 401k. I found I could do better with it than the market could. Also, as an entrepreneur, I didn’t like having my cash in something that restricted my control of it.

@Clayton Coombs, My advice is to pepper your flips with an occasional buy and hold.  I've been doing my own taxes for years.  I've hated it.  It has taken me way too long and I've missed a few deductions along the way.  But, I think it was worth it for me learning the principles.  You'll need to learn the principles too, because it is up to you to provide the receipts for your purchases and your activities.   Here are a few things I'd recommend reading:

IRS Publication 527 Residential Rental Property

Pub 535 Business Expenses

Pub 551 Basis of Asset

Pub 583 Starting a Business and Keeping Records

Pub 587 Business Use of Home

Pub 945 Depreciation

If you are just flipping, you won't get to use some of these concepts, but the more units you own, the more depreciation becomes your friend.  There are advantages and disadvantages of corporations.  Your CPAs and lawyers can help you with those concepts.

Don't forget to get @Amanda Han's book here on BP.  She's done a few podcasts too.

I like @Carl Fischer's strategy of using funds out of Self-directed IRAs, but I haven't used it yet. 

Use 1031 Exchange when you can.

Hopefully someone can advise you better for purely flipping.

Mark

You could always buy a new airplane and take section 179 bonus depreciation I have done that over the years.. 

but I love to fly and you make no money with them its a temporary fix.. 

@Clayton Coombs

You and your CPA (or new CPA) need to be talking in the next week or two about year-end planning.

Based on what you've laid out so far, that discussion should focus on your potential QBI deduction and if you're above the threshold amount (and therefore phased into the limitation).  If you are, lowering taxable income to get below the threshold amount, or making an S election and paying out wages become front-burner priorities.

There are roughly 5 weeks left in the year, I would get on it...

The rentals should give you depreciation which will lower your taxable income.  

 You can do few things: 

1) Start to leverage more rentals so the you can offset rental loss againsts your income. You will have no limitations as you are a real estate professional. But a rentals that’s has more equity appreciation( In a nicer area), they will either break even Cashflow and will give you taxloss via depreciation. 

2) depending on your situation, start hiring your family member to shift income to Lower bracket or with no tax. . That way kids can fund their own education and even retirement accounts starting now rather than you funding their school/college via after tax money. 

3) you need to be contributing towards qualified profit sharing plans via your businesse. You can shelter more than 60k for you, and may be 60k for your spouse, if your entity is structured properly to make it happen.

4) hopefully you are running your flips via S -crop to save on self employment taxes. 

You need to talk to a good Professional.

welcome to the world of making money.. you could buy rentals that will give you some shelter..

but if your going to make big dollars either in commissions or flipping you pay tax.. simple as that.

and by paying tax you look very good to lenders who will allow you to scale up.

There is no way around it.  . but honestly I would rather paying much more tax because that means I make lots of profits resulting in the high tax