An Incomplete List of Potential Tax Moves To Make

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“When you know better, you do better.” -Maya Angelou

Ah, November. Cool weather, Thanksgiving, football. Even though 2020 still seems to be chugging along in all of its particular form of glory, we can at least get productive and distract ourselves from the political war games by making a positive impact on our financial world. Although, in Utah, Governor Gary Herbert is making Thanksgiving plans by Skype video.

Here are some things to consider as you do:

1) Look ahead to 2021. By that, I mean: what will your income potentially look like in 2021? For some, ANY income after a very rough 2020 would be welcome. But once you have that landed ... should I accelerate possible 2021 income into 2020 for tax reasons? Because the best of both tax worlds is to reduce your taxes in both years.
So take a look to see what you think your income will be looking like by the end of this year (including any investment year-end payouts, gig work, gambling winnings, etc. ) and what you expect it to be in 2021 (more, less or about the same). Next, check out the Read More...


The Dangers of Distraction

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"Every new beginning comes from some other beginning's end." -Seneca

There's a famous study, often referenced in business focused productivity/success books and podcasts that you probably have heard about in some form or another:

[Edited excerpt from Wikipedia]

Mischel's famous research study, "The Marshmallow Test," showed the importance of impulse control and delayed gratification for academic, emotional and social success.

In the 1960s at the preschool on the Stanford University campus, Mischel put marshmallows in front of a room full of 4-year-olds. He told them they could have one marshmallow now, but if they could wait several minutes, they could have two. Some children eagerly grabbed a marshmallow and ate it. Others
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Wholesaling for Beginners #1

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Wholesaling! The big new (sort of new) real estate investing strategy. Wholesaling has, in fact, been around forever. Investors and non-investors have been able to assign contracts as long as there have been contracts. Many states (including Utah) have standardized forms to assign the contract. But it’s been more recently, in the last 4-5 years that wholesaling has become its own cottage industry within real estate investing.

Wholesaling is the strategy of finding a great deal and locking it up by putting it under contract. The wholesaler is the buyer and the property owner is the seller on that agreement. But then, instead of the wholesaling actually purchasing and closing on the home, she “assign” or passes the contract—the right to buy the house—to another buyer for a fee.

It is possible to assign a fix & flip project, a buy & hold project, a seller-financed deal, residential or multi-family deals, or a commercial deal. Wholesalers are generally very good marketers and negotiators. In other words, they are good at finding deals, negotiating great terms, and getting a signed purchase agreement. So that’s where they focus their time and energy.

Wholesaling is way you can get involved in real estate
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Are The Opportunities Worth The Threats?

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"Not only must we be good, but we must also be good for something." -Henry David Thoreau

Too many entrepreneurs are blind optimists. (And yes -- too many accountants are blind pessimists, I admit.)

Aside from the financials of a new venture, there are obviously other factors that play into its outcome. And my gut is that the people on your team already know what they are. They're probably not writing a book or preparatory articles about it (yet), but they probably have some good ideas.

Over 50% of U.S. businesses fail in the first four years. Many that linger past that point are alive in name only. Yet very few entrepreneurs actually believe they have a less than 50% chance of success. They are convinced that those statistics only apply to the other person's ideas.

The concept of a pre-mortem was designed to h
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Understanding Short-Term Rentals #4

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OK, this is our fourth blog on understanding rentals. If you haven’t, go back and read the previous three for a better understanding. We covered the possible local laws restricting short-term rentals, how they are taxed at the federal level, how to hold title and how to save money on the self-employment tax.

This article is going to discuss another surprise tax that many investors don’t understand: sales and lodging taxes. These are the taxes all hotels have to pay, and they are at the city, county and state levels.

Short-term rentals, like those offered on services such as Airbnb and VRBO, have always been required to collect and remit sales and lodging taxes. Historically, the large vacation rental websites viewed these occupancy taxes as the responsibility of the host or homeowner responsibility, not the platform.

The platform was positioned simply as an advertising website or marketplace, and transactions occurred directly between homeowner and traveler. These taxes, however, were often overlooked and not well understood by homeowners and hosts.

As the short-term rental industry has continued to grow, these lodging taxes are increasingly part of the industry narrative and becoming much better understood. Short-term rentals are now ubiquitous, which has sparked pushback in some communities, with a new and heightened focus
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Understanding Short-Term Rentals #3

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In the last blog, we learned that the rent from short-term rentals is considered ordinary income (like flips) and not passive income (like long-term rentals). That’s a big deal because ordinary income is subject to the self-employment tax of 15.3%. In this article, I’m going to teach you how to hold title to the short-term rental and how to save on the employment tax.

First, you want to hold title (who “owns” the property as listed on the county land records) in an asset-holding LLC, like a “series” LLC. If you’re unfamiliar, go back and read the blog, “The Series LLC” from September 18, 2020. This LLC is taxed either as a sole-proprietorship (single member) or a partnership (multi-member). It is NOT taxed as an S-corp. (no S-election!!)! This is important. And ALL your rental properties should be owned like this!

So, there is no difference in how you hold title or own your short-term rental. Own it just like all your other rental properties. But, because this rent is taxed differently than the rent you collect on long-term rentals, you going to structure the “renting” part differently.

The first thing you will need to do is set up a “property management” LLC. This is NOT the LLC that owns the rental! This is set up to do nothing more than manage the short-term rental (you can also use it manage your long-term rentals and deflect lia
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SBA Sets PPP Forgiveness Guidelines

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You might have seen some rumors on this already, but I wanted to help make everything clear for you...

A few weeks back I told you that there were some tax professional rumors circulating about “automatic PPP loan forgiveness” for loans under $150K. Remember that?

Well, they did it!Except it is for even smaller loans (under $50K).

And it's not "automatic", but it is very, very easy.Here is the simplified applicationif your loan falls in that category.

The borrower needs to make various certifications -- that the spending meets at least 60% of PPP loan proceeds and attach verification of payroll costs and non-payroll costs. But you don't have to perform FTE (Full Time Equivalents) or salary reduction calculations. Owner wage limitations still apply of course.

It's essentially an affidavit
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Understanding Short-Term Rentals #2

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Last week we talked about short-term rentals and the need to confirm the licensing and zoning issues that may apply. Here we are going to talk about the taxation of short-term rentals. What follows is a summary of some tax issues. This is NOT meant as tax advice. Please consult your own tax professionals.

Rented for Fewer than 15 Days During the Year– When a property is rented for fewer than 15 days during the tax year, the rental income is not reportable, and the expenses associated with that rental are not deductible. Interest and property taxes are not prorated, and the full amounts of the qualified mortgage interest and property taxes are reported as itemized deductions (as usual) on the taxpayer’s Schedule A. This would only apply if you rented out your residence or a vacation property on occasion.

The 7-Day and 30-Day Rules– Rentals are generally passive activities. However, an activity is not treated as a rental if either of these statements applies:

  1. The average customer use of the property is for 7 days or fewer—or for 30 days or fewer if the owner (or someone on the owner’s behalf) provides significant personal services (like cleaning). This is the important one.
  2. The owner (or someone on the owner’s behalf) provides extraordinary personal services
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How To Approach Bigger Business Players In Your Niche

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"The only person you are destined to become is the person you decide to be." -Ralph Waldo Emerson

Successful people rarely reached the top without a lot of help along the way. The ability -- and willingness -- to ask for help is one trait that really stands out among those who are truly committed to success. You find these people at your local Real Estate Investors Association https://nationalreia.org/find-a-reia/

Personally, I've been approached a number of times by tax and accounting "up-and-comers" I and have seen this done the right way ... and the wrong way. Whether it's your boss or another entrepreneur, here are some tips for seeking advice and connections from those who get asked for this all the time:

• Do NOT waste their time. Once they've agreed to help, get to the point quickly. Don't go through your life story in excruciating detail, nor spend an hour explaining your business plan or the plot of your novel. Plan what you want to ask so you can make a clear, succinct request.

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Understanding Short-Term Rentals #1

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There has been a big push for landlords to look into short-term rentals (think, Air BnB) as opposed to longer-term (monthly or yearly) typical rentals. The reason for the push is that renting a property nightly can bring in much more per month—even including vacancies. It has become almost an entirely new real estate investing technique.

While a great way to make additional rents, there are things that you should understand before jumping in with short-term rentals. The first is legality. All rental properties are regulated by the city in which they are located. You will also see county or state-wide regulations. But typically, state laws govern the relationship between landlords and tenants and other larger matters. In most jurisdictions, the specifics of what types of rental properties are allowed are done at the city level.

This city-sponsored legislation arises because cities are charged with protecting neighborhoods and the “look and feel” of their respective cities. And they have a lot of authority on rentals. Most cities require landlords to register ALL their rentals properties, pay a licensing fee and make determinations as to how many unrelated tenants can live in a give property. If you are a landlord, you should take a serious look into your city’s regulations!

But, short-term rentals are a new and different kind of renta
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