year end tax strategies for business owners and real estate investors
DESCRIPTION
Year End Tax Strategies for Business Owners and Real Estate Investors In this 60 minute FREE video http://www.hasslefreecashflowinvesting.com/video/year-end-tax-strategies-for-business-owners-and-real-estate-investors/ ($39 VALUE) with professional investor David Campbell, tax strategist Amanda Han, CPA, and self-directed IRA expert Kaaren Hall, you’ll learn: * Top 5 Year-End Tax Strategies to save you taxes for 2012 and beyond * Strategies to pay yourself rather than the IRS * How you can make all your own choices about your retirement investing and not rely on the stock market * How IRA investing is different than investing with personal cash * How to buy profitable real estate inside your IRA even when you are starting with a small balance * Strategies for investing in real estate OUTSIDE your IRA when all of your cash is locked up INSIDE your IRATRANSCRIPT
Year End Tax Strategiesfor Business Owners
and Real Estate Investors
Kaaren Hall - Presidentwww.uDirectIRA.com
David Campbell - CEOwww.HassleFreeCashflowInvesting.com
Amanda Han - CPAwww.KeystoneCPA.com
[email protected] [email protected] [email protected]
Event Faculty
Begin with end in mindRELATIONSHIPS
IDEASOPPORTUNITIES
NOT a sales pitchNOT investment, legal, or tax
advice
Disclaimers & Cautionary Notes
This educational seminar is not a substitute for getting your own professional advice. This webinar is offered with the understanding that the speakers are not offering legal, financial, tax, investment or other professional advice. Any actions with regard to the information contained in this seminar should be undertaken only upon the advice and counsel of competent legal and tax and investment professionals. Receiving this information does not create a fiduciary or client relationship between you and the speaker. The information contained herein may be inaccurate and the speaker makes no representation about its accuracy.
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Today’s agenda* Top 5 Year-End Tax Strategies to save you taxes for 2012 and beyond* Strategies to pay yourself rather than the IRS* How you can make all your own choices about your retirement investing and not rely on the stock market* How IRA investing is different than investing with personal cash* How to buy profitable real estate inside your IRA even when you are starting with a small balance* Strategies for investing in real estate OUTSIDE your IRA when all of your cash is locked up INSIDE your IRA
www.HassleFreeCashflowInvesting.com
ProfitMoney + Time + HassleROI =
More profit with less invested
Stay to the end for a FREE report
Using a Solo 401k to avoid UDFI
(877) 975-0975 www.KeystoneCPA.com
U.S. HISTORICAL TAX RATES
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Taxes 2012 2013Federal Income Tax 35% 39.6%
State Income Tax 12% 12%
Payroll Tax 15% 15%
Capital Gains Tax 15% 20%
Estate Taxes 35% 55%
New Taxes ++
Tax Rates
Brand New TaxesUnearned Income Medicare Contributions Tax ….Wow, that’s a mouthful!
-Brand New Tax on Net Investment Income = Another 3.8%
Hospital Insurance Tax ….Another Innovative Brand New Concept
-Brand New Tax on Earned Income = Yet Another 0.9%
(877) 975-0975 www.KeystoneCPA.com
(877) 975-0975 www.KeystoneCPA.com
The Unknown
WHAT DO WE KNOW FOR CERTAIN?
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• Tax Rates Will Increase
• Deductions & Credits Will Decrease
• Total Taxes Will Increase in 2013
• 2 New Tax Increases Become Effective in 2013
WHAT IS YEAR END TAX PLANNING?
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DIFFERENT TIMES, DIFFERENT STRATEGIES
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OLD NEW
INVESTMENT STRATEGIES
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(877) 975-0975(877) 975-0975
Income Shifting
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Dell
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Tax Efficient Profit Extraction
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Redirect Tax Dollars to Your Retirement Accounts
• Pay Yourself Rather than the IRS
• Create Tax Deferred Money to Invest and Grow Your Wealth
(877) 975-0975 www.KeystoneCPA.com
ROTH IRA
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Roth IRA Conversion Strategies
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5 Strategies to Convert with Little or No Taxes
1)Contribute to Your Roth
2)Favorable Tax Positions
3) Unused Passive Losses
4) Real Estate Tax Benefits
5) Strategic Optimization
How to Self-Direct Your Retirement Savings
uDirect IRA Services, LLC is not a fiduciary and does not render tax, legal, accounting, investment, or other professional advice. If tax, legal, accounting, investment, or other similar expert assistance is required, the services of a competent professional should be sought.
Saving for Retirement
• There is a $6.6 trillion deficit between what Americans have & what we need for our retirement.
• $100,000 in retirement savings @ age 59.5 (assuming no growth or loss) means $396.83 a month if you live till 86.5.
Total Retirement Funds
• $4.6 Trillion in IRA money$4.3 Trillion in 401(k)s$4.2 Trillion in Pensions$2.3 Trillion in Defined Benefit Plans$1.6 Trillion in Annuities$17 Trillion in retirement funds and 97% of it remains to be self-directed.
Self-DirectionWhy Haven’t I Heard About This?
• Few attorneys are knowledgeable – About self-directed plans
• Few CPAs are knowledgeable– About self-directed plans
• IRS rules have allowed self-direction since IRAs were created in mid-1970s
What’s the Difference?
Typical IRA• Stocks• Bonds• Mutual Funds• CD’s
Self-Directed IRA• Rental Property• Notes• Private Stock• LLC’s• Tax Liens• Foreign Property• Raw Land• Etc.
What About Losses?
Losses
• Cannot be written off taxes
• Cannot be replaced in the retirement plan
What Are The Limits?
A Self-Directed IRA can invest in anything EXCEPT1. Life Insurance Policies2. Collectibles
1. Artworks2. Coins3. Collectible Cars4. Antiques5. Gems6. Stamps7. Rugs
What if your funds are with your current employer?
Your plan will probably NOT allow you to self-direct
Must wait until you leave the companyTo rollover retirement plan
You can request an “in-service” transfer from your current plan administrator.
Prohibited Transactions(IRS Publication 590)
•Borrowing money from the IRA• Selling property to it.•Using it as security for a loan.•Buying property for personal use (present
or future) with IRA funds.
Disqualified Person
• Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).
Qualified Persons
• Aunts & Uncles• Cousins• Brothers & Sisters• Unrelated friends• Nieces & Nephews
Prohibited Transactions
• Neither you nor any disqualified people may benefit from IRA
• Cannot buy, sell or exchange property between plan and – Self or – Disqualified people
• Cannot provide goods, services or facilities
Self-Directed IRA - Structure
• You
• Your IRA
• TPA
• Custodian
Buying Real Estate With Your IRA
Pros1. Capital gains are tax free2. Positive cash flow is tax free 3. No time limit for holding property4. IRA can borrow money
– Leverage your investment
5. Potential to earn a larger rate of return on invested capital
Buying Real Estate With Your IRA
Cons1. No immediate tax advantages of owning
real estate 2. No deduction for capital losses3. You are solely responsible for all gains or
losses4. You cannot replace losses
Your IRA Can Take A Loan!
• Loan must be non-recourse
– Upon default, lender can seize subject property only
• Upon default, lender cannot– Seize other IRA plan assets– Seize your personal assets
Non-Recourse Loans
• Few lenders to choose from– Must be a portfolio loan– Cannot be sold on the secondary market
• Larger down payment required– 40% to 45%
• Cannot personally guarantee the loan
Personal Guarantees
• Personal guarantees by the IRA owner not permitted
• Can be personally guaranteed by a third party– Must not be a “disqualified” person– Disqualified people are
• Ascendants• Descendants• Spouse and self• And others
UDFI
• Unrelated Debt Financed Income tax• Any property held to produce income is
debt-financed property if at any time during the tax year there was acquisition indebtedness outstanding for the property.
UBIT• Unrelated Business Income Tax• If a tax exempt entity engages in a
business that is unrelated to its primary purpose, any income derived from such business will be subject to UBIT
• IRS Pub 598• UDFI & UBIT are reported on form 990-T
Buying Real Estate - The Process• Open a self-directed account• Shop for a property• Remember, it’s the IRA that is the buyer• Custodian to sign “Offer to Purchase”• Submit a Buy Direction Letter for earnest money
deposit• Funds wired to closing from your IRA• Fund & Record• Rents are made payable to your IRA
3 Types of Plans
• IRAs– Individual Retirement Accounts– What you are doing for your own retirement
• Qualified Plans– ERISA controlled– Typically, what an employer provides you
• Other Plans– Education– Health
Types Of Self-Directed Plans
IRAs Qualified Plans Other Plans
Traditional 401K/ 457/ 403b Coverdell
Roth Defined Benefit Health Savings Account
SEP Profit Sharing
Simple Individual K
Spousal
How Do I Self-Direct?
1. Complete an application1. Provide copy of driver’s license2. Copy of statement
2. Fund your account1. Annual Contribution2. Transfer3. Rollover
3. Tell us what you want to invest in
For More Information
Kaaren Hall, PresidentuDirect IRA Services, LLC(866) [email protected]
uDirect IRA Services, LLC2522 Chambers Road, Ste 100
Tustin, CA 92780
www.HassleFreeCashflowInvesting.com
8 strategic resourcesCash
CashflowEquityCredit
_________
TimeTalent
Strategic RelationshipsControl of deal flow
INSIDE YOUR IRA
OUTSIDE YOUR IRA
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Real Estate AdvantagesBENEFIT INSIDE YOUR IRA OUTSIDE YOUR IRA
Profit from Cashflow
Tax Deferred Taxable
Profit from Appreciation
Tax Deferred Tax Deferred - potential 1031
Depreciation Losses do not offset other gains
Losses may offset other gains
Use of Financing Lower LTV / Higher Int. Rate / potential for UDFI
Higher LTV / Lower Int. Rate / no UDFI
Management business write off
Not allowed: excess contribution
Deductible expenses may shelter active income
How do I buyreal estate outside my IRA
when all my money is locked up inside my IRA?
IRA
PropertyPurchase
Cash Out Refinance
IRA distribution 401(k) loan
repaydistribution
within 60 day time window
(once per year)
401(k) five year
repayment
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withdraw pay taxinvest
72T ?
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Do the math with your advisors!
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Group InvestingSeveral individual investors combining their financial resources into a single investment
managed by a team of professionals.
Investing with your IRA when your balance is small