Sep 30, 2020
This episode is part 3 of my
conversation with the “black belt” in real estate taxation,
Michael Plaks. If you weren’t able to follow this episode, please
go back and listen to part 1 and part 2.
Let’s jump right into Michael’s
story and how he saves real
estate investors from excessive taxation.
[00:01 - 05:29] Real Estate Professional
Documents
- How
do I document what I’m doing so that I could be considered a real
estate professional?
-
- Your
tax professional is not going to ask you to prove anything as long
as it makes sense.
- IRSA
may ask you to prove it
- Keep
track of these four items for every expense: ‘where, how much, to
whom, and why.’
- If
you have multiple properties, you will have to keep track of the
no. 5, ‘for what property.’
- Don’t
put it on QuickBooks; it is a too complicated system and not ready
for Real Estate Investors.
-
- You
could customize QuickBooks but still will a little bit
complicated.
- Unless you have professional help to customize,
stay away from it
- If
you don’t want to have a professional system, use expense tracking
apps, they are more simple.
[09:27 - 17:14] Bonus Depreciation
question
- Last
year I had Bonus depreciation, but neither one of us is a real
estate professional, so we could only deduct it on the passive
income receipt. Is it have to be the properties associated with
deduction, or can it be used on some of our other
rentals?
-
- Bonus
depreciation is a form of depreciation and one of the methods to
deduct appliances when you buy rental properties.
- The
answer to this case is; the husband can not qualify to deduct
because of his W2 job, but the wife could because this year, she
has spent more time in real estate than other jobs.
- It
could only be unlocked when you spend more time in real estate
within the year than any other job.
[17:15 - 25:54] Income vs Tax
- Michael shares a study case that he presented
in his class
-
- Tell
stories of some clients and ask the students about their
opinions
- The
amount of tax that someone is paying reflects the amount of money
that they’re making
-
- Better off willing to pay 45% of the income to
tax, then not making any money at all
- Start
reaching out for professionals to avoid costly mistakes
Tweetable Quotes:
“Unless you have professional
help to customize, stay away from Quickbooks” - Michael
Plaks.
“Better off willing to pay 45%
of the income to tax, than not making any money at all .” - Michael
Plaks
Resources Mentioned:
You can connect with Michael
on Facebook, Youtube, and Linkedin. You can also check out his website at
https://www.michaelplaks.com/
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