Real Estate Revealed: How to AVOID Paying Taxes...(Legally, of course)

Ever wondered how so many people seem to avoid paying taxes…legally, of course, when investing in real estate? Want to know how YOU can avoid paying taxes, legally? Here’s how - enjoy! Add me on Snapchat/Instagram: GPStephan

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Number 1: The first is that pretty much anything in real estate that relates to your business is a write off against your income. Just about anything you related to the income you make on a rental property is a BUSINESS expense, and that’s subtracted from your total income - and you pay less taxes.

Number 2: Depreciation. This is probably THE best write off in real estate. This is often how people can make thousands of dollars in profit every month, but on PAPER, they’re claiming they LOST money. In some circumstances you can even use this loss to offset other income you made!

Number 3: This is probably the most well known, and probably one of the coolest write offs in real estate… but for those who aren’t familiar with it, this is the 1031 Exchange. One of the benefits of investing in real estate is that you can INDEFINITELY defer paying taxes when you sell a property, and “exchange” it for another property to avoid paying tax on your profit.

Number Four: This would apply to most of you watching, especially if you own your own home, is the capital Gains exclusion. This capital gains exclusion means that you can make $250,000 TAX FREE PROFIT if you’re single, and $500,000 TAX FREE PROFIT if you’re married when you own a primary residence and have lived there for 2 of the last 5 years.

Number 5: There’s no tax on appreciation until you sell. This is similar to owning a stock that goes up in value, you don’t pay taxes on that stock until you actually sell…until then, any profit you’ve made is called an “unrealized gain.” Same thing in real estate. If the property goes up in value 5% annually, your net worth goes up without you owning a dime in taxes.

Number 6: The cash-out refinance and HELOC, which stands for Home Equity Line Of Credit. The benefit of this is that you get access to your money, totally tax free, without technically “making” money. In the eyes of the IRS, you don’t pay tax until you actually sell…and because you don’t sell, you don’t owe any tax. Same principle applies to a HELOC. All of the money you pull out is tax-free since technically it’s a loan and you need to pay it back.

Number 7: Rental income doesn’t pay self employment taxes, which consists of social security and medicare taxes. This means that rental income, right off the top, is taxed 6.2% LESS than that same income you’d make from you job - or 15.3% less if you’re self employed, not even including all the deductions, tax write offs, depreciation…so you can see, real estate is a good way to make some money ;)

Number 8: Mortgage interest deduction. Now this is a great one that not only applies to rental properties, where you simply just use that as an expense against rental income, but this also applies to your personal residence. The IRS says that you can deduct the interest you pay on up to $750,000 of your mortgage against your earned income, lowering the amount of taxes you’d owe.

Finally…number 9…the holy grail for real estate people…is the title called “Real Estate Professional.” Becoming a “real estate professional” opens up a lot of advantages. The biggest advantage of being a real estate professional is that you can use your PAPER LOSSES to OFFSET other earned income!

Remember: this is not financial advice, and CONSULT A CPA for any of your specific tax questions. Everyone is different and it’s important to hire someone for your own specific tax advice and needs.

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[REPMC]

I actually did a coaching call with Graham last Friday. Easily the best money I have spent all year. I estimate his $200 phone call saved me at least $96, 000 on a deal I am making and I still had time at the end to ask him questions for fun.

10/10 would recommend.

[iamfuckingyourwaifuandther]

Ha, losers I avoid taxes by not having a job.

[The-Vibrant-Photography]

Bro you just unpacked all the things all the other “real estate professional you tubers” skirt around and don’t ever take the time to define. So much quality content here, thanks a million!

[jamescrenshaw]

Well, I am a CPA, and that was a really good video. And there are other points for real estate investors too, but your coverage was excellent! A tiny nit, especially since your point was that real estate businesses are not subject to SE tax, but employees pay 7.65% for social security (6.2%) and Medicare tax (1.45%) with a wage cap for the soc sec portion, with these amounts matched by their employers. Self-employed people in businesses other than real estate pay the entire 15.3%, but also get an additional deduction equal to one-half the SE tax that reduced their taxable income.

[johnkeeler]

The 1031 exchange 😍😍😍 I'm finally beginning to understand how upscaling is profitable, versus just getting lost in a sea of accumulated liability

[melissah.]

LOL I am taking tax accounting this semester and one of the first things I learned was the difference between tax AVOIDANCE and tax EVASION. Its hilarious to me how many times you said "you can avoid paying taxes LEGALLY of course" in this video.

[RodanChi]

Nice, the big picture gets even bigger. My buddy went over the depreciation and 1035 exchange with me a while back but now things are fitting together better.


Thanks again, you are an awesome you tube personality and natural teacher.

[Itr-tvkt]

i just bought my first rental house.. i m new to this.. i think i have to watch this video over and over again until i fully understand this
This video contains tons of great info that no new real estate investors would know.
Thanks graham for this video

[TsetsiStoyanova]

wow, you're dropping gold nuggets with 100 miles an hour there Graham... it's hard for me to keep up, I'd have to repeat watch and then take notes over and over, to fully grasp your gold.

[knowthyself]

Thanks Dude. I'm coming out of severe financial turmoil. I will be debt free this year and will be able to safe 70% of my income, while living abroad in Medellin. 2019 is debt destruction, 2020 is investment accumulation, and 2021 is real estate and stock investment. Once again, thanks for the tenant website, I saved in my notes.

[Bwhite]

This video must have changed so many lives in the last 2 years. I am sad that i found it this late in the game! Thanks Graham!

[thatflywelshguy]

This channel is excellent. I'm currently in the rat race in the aviation industry but have wanted to get into real estate for the last 2-3 years. I'm hoping to buy my first rental property next year and will definitely be doing your course to guide the way.

[marcsarfati]

Some cons.

1) show loses on tax even paper-
You never get loan on tax return

2) write off are not 1 to 1
They are 1 to .6

3) take loan on property and not use on property you are paying taxes on it.

4) deferring taxes not always a go idea. In 1979 income taxes were 70%

—-

The rest was right.

[robertocayabyab]

When you learn, teach. When you get, give.

[JohnCiprian]

Great job taking a complex subject and explaining it easily. Thanks!

[Mroberts]

Got, Damn, Graham! I appreciate the heavy help my man!!

[cotycampfishing]

Waiting for the “IRS is auditing me” video lol just messin man great video as always. Learned a lot of new stuff!

[ricoz]

Much love coming from Detroit Michigan keep the informative content coming Graham you and a few others have help Inspire me to take action tawards my dream life and not the programed life they have set up for us 💪🏽

[frantzjules]

Really good content, worth every second of it. Thank u man for break it all down for us to understand it. Now i've homework to do ''legally of course''

[delsol]

Question Graham. The step 6 (HELOC). When you borrow money using HELOC, yes it is tax-free but aren't you paying for the interest? It is cheaper than paying tax but you have to replay the HELOC back to the bank. How is that considered as an income? Am I missing something? -_-a
Thanks for the great videos.