For entrepreneurs, it’s never too early to think about tax deductions. By strategizing your moves, your business will be able to maximize savings through real estate and charity deductions – especially since there’s a new tax law that affects businesses’ 2018 returns.
Here are six tax deductions you need to understand as you prepare for your year-end planning:
1. Transfer business valuations and minority assets to your children
Did you know that you couldhand over your wealth to your children without paying taxes? All you have to do is to transfer a minority interest to your children. In fact, anyone can do this transfer.
2. Depreciation on businesses and real estate for equipment and partial real estate benefits your business.
Depreciation – a decrease in value on buildings and other assets – is one of the biggest incentives. When real estate investors invest in properties, they can avoid paying taxes, which is actually legal.
3. A valid loan is not taxable.
This is something not a lot of people know about – you don’t have to pay taxes when you make a loan from a business or real estate. Additionally, you also don’t have to pay taxes if you pull money out by borrowing money.
4. Heirs won’t have to pay taxes when they inherit properties.
Income tax becomes null when a person passes away. A process called basis step-up helps you avoid paying taxes for your estate. Therefore, the basis for inherited property is not what your deceased family member initially paid for. Instead, it ‘stepped up’ to the updated value at the time of death. This includes all inherited assets – stocks, real estate, and bonds. For example, if your assets are less than $20 million, your descendant won’t have to pay for the estate tax.
5. Like-kind exchanges exempt you from paying taxes.
When it comes to real estate, you don’t have to pay taxes from a recently sold property if you buy another piece of real estate. Doing so can help you save millions on taxes! People call this method “Buy, borrow, die.” You buy real estate; borrow the money out to avoid paying taxes; once you pass away, the taxes are voided. You can buy the new property even before you sell your existing property (up to two years before selling it).
6. Real estate property or cash flow fall under charity gift donations.
Did you know that you‘d still be able to own an asset and still get a deduction? With the recently implemented tax law, itemizing will help you save money by giving an asset away. Charitable donations give you a great tax break in many states, which can land you a deduction on federal taxes.
Don’t worry because these tax deductions are perfectly legal. If you have any inquiries, a team of professionals from SMB Compass will be more than happy to answer your concerns. You can contact them through email at[email protected] or via phone at (646) 569-9496.
