| The holidays are nearing and it's that time of the year | | | | fees, vending, etc). For those income items that you |
| when we begin to create our holiday wish list and | | | | are expecting to receive close to year-end, consider |
| begin to budget our money for all the things we will be | | | | delaying those payments until the beginning of the |
| buying. For many of us, the holiday season is a | | | | following year. This essentially allows you an entire |
| wonderful time of the year but it can also be one of | | | | year to use, invest, and grow that money on a |
| the most stressful. The reason: money. There are | | | | tax-deferred basis! On the flip-side, if you are |
| many ways that we save money for the holidays: | | | | expecting to sell a property for a loss, it may make |
| working extra hours, budgeting, and bargain shopping, | | | | sense to structure the transaction to close before |
| to name a few. However, during these busy holidays | | | | December 31st so that you can receive the tax |
| seasons, we must not overlook one of the primary | | | | benefit from that loss in the current year. |
| ways in which we can save money...and that is Tax | | | | Another common technique that applies to real estate |
| Savings. | | | | investors is a process known as "expense |
| One of the most powerful ways in which to save | | | | acceleration". Essentially, this is where the taxpayer |
| taxes is the strategy commonly referred to as | | | | takes a look at what type of expenses they should |
| Year-End Tax Planning. This is a process that should | | | | incur before December 31st in order to take |
| occur during the fourth quarter of every year when | | | | advantage of the tax deductions for those expenses. |
| taxpayers work with their tax and financial advisors to | | | | Here is an example: If you have repairs for your |
| determine actions that should be taken before | | | | investment property that are inevitably going to be |
| December 31 to save significant taxes on this year's | | | | made in the beginning of the following year, one of the |
| income. There are countless strategies available for | | | | things you can do in year-end tax planning is to |
| year-end tax planning depending on the taxpayer's | | | | accelerate those repairs. By incurring those repair |
| own unique situation. The common thread, however, | | | | costs before the end of the year, you are now able to |
| with all the strategies, is that the action items generally | | | | take a deduction for the repair on this year's tax return |
| need to occur before December 31. In essence, | | | | and in turn decrease your tax liability. This technique |
| year-end tax planning is a legal way for you to plan | | | | can also work well for mortgage payments. Generally |
| your activities and defer payment of taxes into future | | | | speaking, many of our mortgage payments are due at |
| years. | | | | the beginning of each month. But if you can prepay |
| You may be asking yourself, "What are the benefits | | | | your mortgage payment prior to December 31st, you |
| of year-end tax planning?" First, it could result in some | | | | have in essence accelerated your deduction for |
| pretty significant tax savings as it is one of the most | | | | interest expense into the current year. This strategy |
| powerful tools when it comes to tax minimalization. | | | | can also be used for other types of expenses such |
| The second benefit is cash flow. We all know that | | | | as painting, replacing parts of flooring, improvements, |
| cash flow is one of the key essentials to success, and | | | | and landscaping to name a few. Now here is another |
| paying less taxes results in more money for you to | | | | tip - contact your vendors and see if they will accept |
| invest and enjoy. The third benefit of Year-End Tax | | | | credit card payments. If so, then you have just |
| Planning is leverage. By taking the time now to gather | | | | strategically taken action towards significant tax |
| your financial documentation for year-end planning, not | | | | savings without any money out of pocket! |
| only are you able to save money on this year's taxes, | | | | In this article, we shared some common year-end tax |
| but it could also reveal some action steps that you can | | | | saving strategies that are available to real estate |
| take in future years to minimize your overall taxes. | | | | investors. However, as in any tax planning opportunity, |
| As a real estate investor, what are some year-end | | | | it is unique to your own situation. For best results, take |
| tax strategies that may be applicable to your situation? | | | | a look at the whole picture...and that includes your real |
| One of the ways in which we can reduce our tax | | | | estate activities, personal activities, other investing |
| liability is to shift income into future years. For example, | | | | activities, and financial plans for future years. Year-End |
| if you are selling one of your properties at the end of | | | | tax planning is a complex but powerful tool that can |
| the year for a gain, consider closing on the transaction | | | | significantly increase your earning and investing |
| until after December 31st. By doing so, you have | | | | potential by reducing tax liability. So be proactive, and |
| strategically deferred the gain on the sale and the | | | | work with your tax advisor to see what you can do |
| related tax liability into the following year. The same | | | | before December 31st to legally reduce your 2009 tax |
| strategy can be used for other types of income that | | | | bill! |
| you are expecting to receive (option payments, late | | | | |