You Can't Avoid Taxes This Way

You Can't Avoid Taxes This Way

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[anthonys]

The caller is listening to fake gurus who talk about financing property as a tax dodge.

[thanniss]

So you’re not using the purchase of a warehouse as a tax expense of the business? You need to change accountants.

[turman]

The full purchase price, not even the down payment or principal of a loan payment IS NOT tax deductible. Only interest and expenses of upkeep. The Interest might be %10 rather than the %25 the feds want. The tax savings comes from the depreciation of the property which can still be significant. Buying a $1M dollar property might give you a $60K-$90k per year depreciation + interest and upkeep deductions depreciation which might translate to $15k-$25k tax savings PER YEAR depending on your bracket percentage. Interest deductions at Equipment (like big SUV's) can get bonus depreciation of 5 years in the first year of use. That's why buying trucks and SUV's is a bigger tax savings in the short term, but they really do loose all the value over time.

[jaredhall]

It’s the cash flow. If he spends all his cash on a building then he may struggle to pay his taxes I think is what he is worried about. Valid concern and a good use case of where financing and leveraging debt is useful. He can pay more than the minimum payment and buy down the interest and keep cash reserves to operate and pay his taxes

[buck_neezy]

The way to avoid taxes is to refinance instead of selling the property. When you sell the property you create a taxable event unless you reinvest and do a 1031 exchange.

[Christ_is_King]

trying to save money on taxes with write offs is like stepping over a dollar 💵 to pick up 10 cents

[rniejx]

I think you are all missing the point:

He isnt planning to report/pay taxes on that cash, but if he buys the building with it, he will have to pay tax on it to avoid IRS asking where cash came from.

[ChrisCardenDrums]

So you'd rather write the interest off of your taxable income? That's WILD...

[joshuawoodford]

He's thinking to buy the property, doing a cost segregation study, accelerating depreciation to offset his taxes. In order to offset his taxes he would need to finance the property first since he's not liquid enough (has to make a taxable sale) file for the depreciation, then sell his taxable position alongside the write down on the new property netting him a smaller tax bill. Then if he so chooses he could pay off the loan in cash, after approximately 18 months depending on where in the tax season this is all executed. What drives the intelligence of this idea is purely based on how large the tax bill is vs new properties financing costs and amount of depreciation and other write downs, time value of money etc. if he's talking about numbers under 500k probably not worth the effort, you're talking 5M saving 2% on this pseudo arbitrage could be worth the 100k savings.

[JayAT]

This guy thought he was phoning the "i buy gold", "i own the gold mine", "i dont buy a car, i buy a house that buys a car" guy

[SpraqNetworkRJ]

Isn't purchasing a building for business a write off on taxes?

[edgaraguinaga]

What is he talking about cant you use the funds for the warehouse as rent oramything be deductible for taxes!! If you owna a home and rent it and no one rents it you can write off your rent you paid cuz its considered loss so deductible!!

[papiparsons]

I hate global standards for every situation. Why withdraw $140, 000 from your retirement to buy an item with a tax hit when you can save by financing it? You must evaluate every situation. Borrowing money is not evil if done correctly

[mike]

Everyone is incorrect.
It’s November. I have 300K in profit in business A. Well. I don’t wanna pay 80k in taxes in April.
So I create another LLC. My LLC with the 300K in profit loans my new LLC 200K. That new LLC. buys a 1m dollar asset. A small apartment building. That’s cash flows. That provides tax depreciation.
I’m left with 100K in profit in my first LLC. My tax bill was 21K and I’m still pissed about it.
At the end of the day you will have to write a check. It’s up to YOU who you write that check too.

[adrianc]

“There is no write off in debt” ? ……. 🧐

[Ballinhard]

I'm just a small time construction manager and even I know how profits and losses work. This guy is clueless. Business expenses are not taxable if you put every penny you make back into the business you won't be paying taxes on it until the liquidation of those assets i.e. sell the business/building without replacing it.

[tomcat]

“The interest is deductible” that’s the point Dave!

[drsauerkraut]

I worry about some of you and understanding tax laws. Holy shit!