Then you should probably talk to a financial professional very soon so that you don’t get killed by taxes. If you move quickly, there are still some strategic steps you can take to create tax deductions and increase your after-tax income this year. Don’t let the IRS enjoy the fruits of your labors.
As I’ve alluded to in other posts, there are strategies you can implement to grow wealth and earn higher returns. But it is also important to keep in mind that you can calculate a return by looking at the amount you spent and the amount of tax savings it created. This isn’t so obvious, but the returns often vastly exceed what is possible on more traditional investments.
Need a couple of ideas?
- Start up and fund a Defined Benefit Pension Plan. Business owners nowadays tend towards profit-sharing and 401(k) plans. I’m not sure why. These don’t allow for nearly as much tax-deductible contributions as a defined benefit pension. Public companies have shunned pensions in favor of 401(k) plans but they have a need to keep their expenses down as they have to answer to their shareholders. But for small business owners, why in the world would you be concerned about the “expense” of contributing to a pension for your own benefit? Business expenses are tax deductions!
- Cost Segregation. I’m always amazed that so many real estate investors don’t know about this. A cost segregation study is a way to itemize the components that make up a real estate investment and depreciate them over their useful lives. A very high percentage of the value of the real estate is made up of items that can be depreciated over shorter lifetimes. The result is accelerated depreciation. Since depreciation is not an actual cash outlay, this means more money in your pocket right now. A cost segregation study can pay for itself many times over in tax savings. A cost segregation study may be the best investment you could make all year.
For more information on these ideas and for more innovative ideas, please feel free to contact me directly.