How the filthy rich pay $0 in taxes

Meet Wendy, a former Walmart cashier who transformed her financial situation by leveraging real estate. Now, she owns three properties in Las Vegas and pays $0 in taxes.

Her neighbor, Gigi, works 8 hours a day, five days a week, and almost half her paycheck is gone to pay taxes…

Why’s that?

Well, not all income is created equal. Today, I’m gonna show you four tactics that the filthy rich use to lower their taxes and end up paying $0.

1. Depreciation

When a property is rented out, it has wear and tear, and the IRS allows a depreciation deduction of 27.5 years. For example, if a house costs $200,000 (excluding land), you put it as a rental. You get to write off $7,272 per year for 27.5 years. Let’s say you rent out your house, and the monthly rent is $2,000; for a year, the total rental income is $24,000, and you get to write off $7,272 right off the bet.

For commercial property, the depreciation year is 39 years.

2. Mortgage interest deduction

The home mortgage interest you paid for the rental property is deductible. Again, this is a write-off of your rental income.

3. Repair and management fee

The stuff that you buy from Home Depot, Lowes, or anywhere that you repair your rental property with are expenses you can write off. For example, air filters for AC, new toilet kits, and new keys and handles. Make sure you keep the receipts and proof of payment (credit card or debit card statements.)

Property Management fee

If you hire a management company, those monthly expenses are deductible, as are the commissions and fees they collect. Usually, a good management company will issue an end-of-year ledger listing all the expenses and fees that they collected. You can easily bring it to your tax preparer at the end of the year.

4. Real Estate tax

Your mortgage company usually issues a Form 1098, which lists how much you paid in real estate taxes, which are deductible. In Las Vegas, we rarely pay school taxes, but in other states, for example, New York or Massachusetts, they pay school taxes, so those are deductible, too.

Recap:

Let’s look at our example of how much we can write off…

Instead of paying taxes on the gross income of $24,000, with all the write-offs, you end up paying taxes on the net profit of $6,328. Let’s say you are in a 10% tax bracket; instead of paying $2,400 in taxes, you are only paying $633.

These are just a few things we can write off; next week, I will talk about the other items so you can drive the net rental profit even lower.

Find your next cash cow home here, and start using these tactics like the filthy rich….

Connect with me, Chloe at (626)239-5483

Chloe Wu

[email protected]

happychloe.kw.com