The Science of Flipping - Episode 183: How to Not Pay Taxes In Real Estate Investing

Episode Date: January 22, 2021

Taxes. The sexiest topic to talk about on a podcast! Well, maybe not so much, but it's a topic that every real estate investor needs to learn more about!

Hey, what's up everybody? Welcome back to this channel. I am your host, Justin Colby, and on this channel we talk all things business, real estate investing, and entrepreneurship. On this video, we are going to talk about my least favorite subject, taxes. But here's the good part. I'm going to talk to you about how you don't have to pay any, and my two favorite write-offs that are going to be really important for you moving forward stay tuned hey what's up guys i am justin colby and on this channel I make sure to deliver you the hottest subjects matters all regarding business, real estate, and entrepreneurship. On this one, it is typically business and entrepreneurship as I'm going to tell you my

two favorite tax write-offs and how you don't have to pay taxes so stay tuned all the way to the end as i want to make sure you get the two major uh tax write-offs that i consider my favorite now if you like not paying taxes smash the like button right now i'll give you a moment good all right now that you've smashed the like button i want to tell you in a big disclaimer first and foremost i am not encouraging you not to pay your taxes that is not what this video is about this video is about some of my preferred write-offs so that i don't have to pay as many taxes now let me tell you a little tip that or suggestion or advice that my accountant tells me. He says this, if you're not paying taxes, you're not making enough money. So if you're out there watching this, like freaking out like I do every year and go, oh my God, I have all these taxes to pay. I hate this. I have to cut this

check. Whatever. You have to be thankful that you're in a position that you make enough money that you're actually paying taxes. For those of you out there that don't pay taxes, in fact, for those of you out there that are getting a tax return, step your game up. Level up. You need to make more money, period. Now, one thing in my philosophy about taxes is, no, I don't want to give the government my money. What are you, crazy? But the reality is, I have an obligatory duty to pay something. Now, the richest and the wealthiest in the world, I actually don't know if they pay anything at all.

I don't dig into their books, but I know the rich stay rich and they have loopholes to be able to navigate that and as a matter of fact i'm going to give you my two best suggestions that you can act on today this year and especially if you haven't done your taxes for 2020 i would encourage you to take a look at these two now back to the philosophy if you do make enough money to pay taxes, I encourage you to pay it. However, that being said, the interest rate on the government lending you money, now I say that very specifically. Let's say you owe arbitrary number $20,000 to the government.

And let's say you want to put them on a payment plan which by the way you absolutely can I learned that the cool way when I was broke bust and disgusted I started make some money but I didn't want to pay the government so I actually had to put them on a payment plan for quite some time and then obviously paid it all off once I started making some real money but I did put them on a payment plan as I was making my way back to making some real money this is back in 2009 ish 2010 ish right so they will allow you to go on to a payment plan you have to reach out to them and discuss now what that really means is they're actually giving you a loan and there is an interest rate connected to that quite literally

it's like the cheapest money you can get i believe and you want to verify this i believe it is like one percent interest and so for those of that you out there that may have a tax bill bigger than you really just want to cut a check for, you may consider putting them on a payment plan because what else can you do with that $20,000 that can make you more money than the 1% aka buy a rental and get a six cap, buy cryptocurrency, buy Tesla stock, flip a property. What can you do with that 20 grand that can make you more money so that you can actually just go and pay off that 20 grand from the revenue, the income that you produce by the 20 grand you kept in your pocket? Follow me? Again, this is really your decision, but it is an idea and a concept

that you can take a look at. If the government is going to lend it to you at a super, super cheap rate, and again, you want to confirm, I believe it's about 1%, can you go out there and make more money than the 1% that they're going to charge you. I believe you can. If you have any ingenuity, if you were an entrepreneur, I believe you can. I am not suggesting to take massive risks. I am not telling you to go to the casino and throw down 20 grand on black and let it ride. That is not what I am saying. But if you are like me and you are a real estate investor, or if you have other investments that is giving you a great return, by the way, as a side note, if you're liking this, smash that like button. It really helps the YouTube gods really help my video out. So smash the like button.

But as a side note, the video I just recorded talks about this, right? And so you want to make sure that you aren't gambling, but you are reinvesting into your growth. Like the video I just recorded, my stock portfolio in 2020 had a 79% increase. Not me buying in 79%, just my portfolio increased by net 79% The S&P 500 I think increased by 18% My portfolio well outperformed everything now. Is that normal? Is that happen often every year? I wouldn't say that but think about that I got a 79% return on my investment in the stock market. Could you take that 20 grand that we're talking about

that you would maybe owe the government and invest it in a way, put them on a payment plan, you invest the money in a way to get a much higher return, and from that return, you then pay off your debt to the government. I believe that is a much better strategy than just chunking down a huge check. Okay. So let that be known that my philosophy may be a little bit different. Um, I don't believe you should not pay your taxes at all. I do believe

you need to pay your taxes. The suggestion, the suggestion I just gave you, you need to be careful. If you don't believe you're gonna be able to chunk down that 20 grand in a payment plan method and you can't do it within the year and then the next year is gonna come up and you're gonna have 20 grand or 30 grand on top of that, now you're starting to get into debt to the government. Not a great idea.

I don't love debt as a whole, but you don't really wanna rack up debt with the government. Not a great idea. I don't love debt as a whole, but you don't really want to rack up debt with the government because they can seize money. They can pretty much do whatever they want. So I would really encourage you, if you are going to think about the idea I gave you, make sure that you can get that 20 grand paid off in a given year and be done with it because again if you're a hustler and a grinder and someone making a lot of money you're gonna have another big check to cut the year after so make sure it gets paid now for the fun stuff if you're ready for my two uh i would say favorite as a moment in time tax write-offs i'm about to give it to you smash that like button for me oh yeah hit the subscribe smash like hit subscribe i'm about to drop my two favorite tax write-offs for

you so first i'm about to be a parent and that is very exciting uh i am 39 years old for you that don't know uh and so i guess i'm a late bloomer when it comes to this. This is gonna be my first child. Very, very excited. We're having a baby girl. It's gonna be awesome. So in 2021, I will be able to take advantage of my newly found exciting tax write-off, which is as an LLC, as an entrepreneur,

I am actually able to write off and or pay, I should say this correctly, I am able to pay my child who is under 18 up to $12,000 tax free. What's great about that is not only do I, as the LLC owner, the entrepreneur business owner, save things like the federal income tax, state income tax, and unemployment unemployment tax there are other advantages such as like payroll tax health care etc that I actually save because that money is an expense to my business and is getting paid to my employee now that also is really cool for my child I'm going to give my child that twelve thousand dollars anyways so why not put them on payroll and they also don't have to pay taxes

now let's be clear I'm not literally giving my infant baby twelve thousand dollars for them to go spend I'm going to pay them that and that can be the start of whether it be a college fund whether it be whatever it case may be I'm you know a wedding fund because I'm having a baby girl But that is not necessarily for them to spend in my opinion that is going to be Given to them so I can a have my tax write-offs be they don't get taxed for it So essentially that money comes in in is free if you want to look at it that way. And it helps me as a parent start to be able to have money for the weddings, the colleges, et cetera, which is really, really important. So as the owner, I save all the taxes.

I don't get taxed on it as my child, as the employee, they also don't have income tax that goes along with it. It's a win-win for everybody. I'm doing it starting effective immediately in 2021, because that's when I'm going to have my first child. Now, my second favorite tax write-off, and this is something that you should really consider, is actually how I'm able to write off my SUV. And as a matter of fact, I'm able to write off my SUV. And as a matter of fact, I'm able to write off a hundred percent of it. Wow. That sounds crazy. So I drive a Range Rover. The Range Rover is over 6,000 pounds. And according to section 179 of the tax code, I'm able to write off a good portion of that. But then you have the bonus

depreciation. So essentially I'm writing off the depreciation. You have bonus depreciation that says in your first year, you can write off a hundred percent of the purchase price of your vehicle. Now I have a very nice vehicle. I drive a Range Rover. And this stipulation is all because in section 179, it is stating if the vehicle is above 6,000 pounds, you can depreciate the percentage of your use of the car for work. Now, I literally drive my car for work. Now that I work from home, I go to the office,

I come back, I am done. So I'm able to ride up to 100% off of the purchase price in the first year of that car. Now, what I will tell you is let's just say you use your car 60% for work, 40% for personal, you're able to ride up to 60% of that purchase price of your SUV. Now, I am not a licensed accountant. So do not just sit here and say, Justin said, and go tell your accountant this is what we need to do. Go discuss this with your accountant. Go do your own research.

By the way, if you like those two ideas, make sure you smash the like button because this is a huge write-off for all of us. I use my Range Rover 100% for work, especially because I work from home now. I'm in my home office as we speak. I'm actually going to leave my home office right now and head into my actual office to meet with my real estate team, who's, by the way, is absolutely crushing it. If you have any interest in real estate investing, make sure you go to thescienceofflipping.com, thescienceofflipping.com, and fill out a quick form.

Me and my team are happy to get on a call with you, see if we can get you going or help you even scale your business, become more profitable. Just go to thescienceofflipping.com. And if you haven't listened to my podcast, The Science of Flipping Podcast, you need to. I'm almost up to 200 episodes.

It is all about real estate investing, real estate investing only. Go to iTunes, go to Spotify, go to any platform where podcasts are and I drop a daily podcast right there. Oh, by the way, and I drop daily videos here. If you are not watching my videos daily, I try to keep them to 10 to 15 minutes. Make sure every single day you jump

online, come to my YouTube channel and check out my videos. It's all business, real estate, and entrepreneurship. Hopefully you like this. If you like this and you like the suggestions, hit the like button. They're two of the best suggestions I have for tax write-offs. There are a lot of tax write-offs. Let's be clear. The more money you make, the more you're going to be looking for these tax write-offs. So start taking advantage of them and I will see you on the next video. Peace. Outro Music