Tax Reduction Podcast
Introducing your host, Boris Musheyev, CPA. In this podcast Boris debunks the tax code by teaching you simple and effective tax strategies, so you can keep the most of what you make. His mission is to help you cut taxes and build wealth using the power of proactive tax strategies. Every episode you will gain a better understanding of how the tax code is designed to be in favor of money-making entrepreneurs like yourself.
๐ Download FREE PDF: 7 Write-Offs Every S-Corporation Business Owner MUST Know: https://bit.ly/podcast7writeoffs
โ๏ธ Schedule your FREE Tax Advisory Session: www.TaxPlanningCall.com
Tax Reduction Podcast
Episode 9. HUGE Tax Break For Self Rental Tax Strategy
๐ Unlock the Vault of HUGE Tax Break For Self-Rental Tax Strategies!
Are you a business owner who also owns the building where your business operates?
Discover the untapped goldmine of self-rental tax strategy that can save you thousands! ๐
This unique approach of Self Rental Tax Strategy allows business owners who also own the building in which their business operates to rent the business space to themselves, thus enjoying lucrative tax benefits. Whether your business is structured as an S-corp or any other entity, this strategy can bring forth a windfall of deductions and write-offs you won't want to miss.
๐ฏ What You Will Learn:
- What is Self-Rental and How It Works
- How to Strategically Utilize Depreciation to Minimize Tax Liability
- Navigating Rental Income, Deductions, and Write-offs
- The Relationship Between S-Corp Entities and Self-Rental Strategy
- Real-life Case Studies and Examples
I've put together this FREE resource for you:
7 Write-Offs Every S-Corporation Business Owner MUST Know
๐ Download FREE PDF here: https://7taxwriteoffs.com/
Ready to start saving money on your taxes?
โ๏ธ Schedule your FREE Tax Advisory Session: https://taxplanningcall.com/
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*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individualโs legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, ...
If you have a self rental meaning if you've got a business and you rent from yourself another property that you own you might fall into what I like to call a self rental trap. Very little accountants out there know that actually, irs has specific rules involving when you rent from yourself, and if you don't follow those rules properly, you could actually be missing out on a lot of potential tax deductions. I will show you exactly how to structure your self rental, to utilize everything that IRS allows you and to take those losses from the self rental against your business profits. That's right, it's possible. I will show you exactly how. Let's get started.
Speaker 2:Welcome to the Tax Reduction Podcast for Money-Making Entrepreneurs with Boris Mousheev. Boris has helped entrepreneurs across the United States collectively save millions of dollars in taxes with the power of tax planning and advisory. The only way you, the business owner, can save money on taxes is by using proactive tax strategies, and this podcast is all about saving you money on taxes. Boris will share with you in depth and easy to understand tax reduction strategies that you can implement in your business within 30 days or less. Let's jump into today's episode.
Speaker 1:So I've broken it out for you in three simple steps. As usual, we're going to talk about what is really self rental. You must understand what it is so you can take it to your account and be like hey, are we doing this Right? How it really works in a tax strategy. You will know exactly how to implement this tax strategy. So you already know me by now. I hold nothing back and everything that I give you is so that you can start implementing it right away. So make sure to stick around until the end. So let's talk about how does this work.
Speaker 1:Generally, what's considered a self rental is that when you own a business but you also own a rental property and you pay rent to yourself, so business rents from you. You've got a business that is a separate entity that could be an S corporation in this case, for example and it rents from you. It pays monthly rent to rent out your space. The rental income, irs says, is not considered passive. That means, when you rent from yourself, any income net profit that you generate minus all the expenses IRS says no, this is not a passive income. That is actually a huge blow. The reason it's a huge blow is because if you own other rental properties. Let's say you've got real estate properties or anything of that sort. Losses generated from those real estate properties are not deducted against the net rental income that you get from yourself. That is actually a really, really huge blow to those that rent for themselves. But is there a tax strategy around that? Absolutely Stick around. Okay, we'll definitely talk about that.
Speaker 1:So it goes a step farther and says that, hey, any losses that are generated from this rental property actually I wouldn't delete this word not are considered passive losses. That means that those losses generated from rental property are not active. That means you can't deduct them. That means they are passive Another huge blow. So you mean to tell me that the income is not passive. That means I can't deduct my passive losses, and the losses are passive, that means I can deduct it.
Speaker 1:You follow what's going on over here. I have no idea why in the world does IRS treat it like this? But the tax codes that the IRS gives you to go around its own rules that it creates. So let's kind of talk about this. Okay, yeah, ๋ชธ. What's important about a self-rental is that you must know that any losses produced by those self-rental even though they're considered passive, but they can actually be deducted against your business income only. Okay, let's talk about that. How does that work? So you must know how to deduct those losses against your business income, and that is exactly what we're going to talk about. We're going to talk about how it works and, like I said, you will know how to implement this tax strategy. Stick till the end and we'll be right back after this break.
Speaker 2:If you have a tax preparer, then you do not have a tax advisor. The only way you can save money on taxes is by using proactive tax planning strategies that only a tax advisor can give you. Boris put together a free PDF for you, the business owner Seven tax write-offs every S-Corporation business owner must know. In this PDF you can find seven tax strategies that you can start using in your business to instantly start saving money on taxes. Click on the link in the description below for a free download.
Speaker 1:Awesome, let's get started. So let's talk about how this works. Okay, so here's you, the business owner. You have a business, but you also have a rental property. Now, in order for this to work, the rental property can be either under your name, which is totally okay if it's under your name, or in a separate entity Okay, it can be an LLC, if that's what you want, or an LLC owned by your spouse, and the business has to be a pass-through entity. This cannot be a C-Corporation. What happens is that your pass-through entity business not pays you a monthly rent to your property, and the rent has to be a fair market value. It cannot be rent just to cover expenses. No, if the fair market value rent for this type of space in that area is $5,000 a month, then you pay $5,000 a month. So what happens is that your business now pays the fair market value rent to you or to your property into that separate business bank account and this entity right here whatever that may be, even if it's not an entity or a single member LLC gets to record the rent, gets to take all the expenses to maintain that property, including depreciation, property taxes, mortgage interest and so forth. Okay, so you pay fair market value rent.
Speaker 1:Now the strategy over here is that this is a self-rental. You can actually generate losses in it and make certain IRS elections, which we're going to talk about in a tax strategy. So make sure you stay till the end, make that election, excuse me, take those losses and deduct it against business income. And to do that, you want to make sure you do accelerated depreciation on that rental property. So the strategy, the biggest strategy that we actually do for all of our tax advisory clients, if they own a property in a business and they rent from themselves, almost always we do an accelerated depreciation, we generate a huge loss and deduct it against business income. Just recently, the most recent tax advisory client that we did this for generated $130,000 in additional depreciation deduction. We're able to take the IRS code that allows us make that election on that tax return and deduct it against her business income. So definitely you want to follow this structure right here.
Speaker 1:How it works. It's either you, the business owner, own the business and own the property. We want to talk about the strategy details in just a minute. Pay yourself a monthly rent. Make sure it's fair market value. Separate these things two out, these two things out right the business and the property and make sure you do an accelerated depreciation, cost segregation, because in this case cost segregation could be huge, huge, huge factor for you. Now let's kind of move on to a tax strategy and talk about how it works, what you need to do so that you can start implementing this tax strategy right away. We'll be back right after this break.
Speaker 2:If all your accountant does is taxes, you may be overpaying in taxes by thousands of dollars every year. Every week, Boris releases a tax strategy on his podcast so that you, the business owner, can pay less in taxes every single year. Be sure to subscribe to our podcast to be notified when a new tax strategy is released. If you're ready to work with a tax advisor on your tax strategy and planning, be sure to schedule your call by heading over to wwwtaxplanningcallcom. Again, that's wwwtaxplanningcallcom.
Speaker 1:Awesome, welcome back. All right, look, let me just kind of stress something. You are a business owner. Every day you go out and you make money. You generate sales. You make sure your profit margins are high. What happens to 40% of those profit margins? You give it away to Uncle Sam. As a matter of fact, irs tax code is written in a way where you can save money and taxes. More than 80,000 pages of the IRS tax code majority of it is written in a way to help you save money and taxes.
Speaker 1:A strategy like this is actually is in the tax code. Of course, it's not going to be written in a black and white. Hey, use a self-rental tax strategy to save money and taxes. It gives you a tax code and you need a tax advisor to decipher the tax code. If you're working with a tax preparer that meets with you once a year doesn't even talk to you about things like that, I can guarantee you right now You're overpaying in taxes.
Speaker 1:Now, in this tax strategy, it's important for you to take notes on this. I don't recommend going out and start implementing it right away. So number one is you want to make sure you meet the economic test. That means you have 100% ownership of the business and 100% ownership of the property. Now, what happens if you own either the business or the property, or both of them, with your spouse? That's okay If you're filing a joint tax return. Irs says that because you're filing a joint tax return, you and your spouse is considered as one individual for the purposes of the self-rental tax strategy. So it is as if you own 100% either of the business or for property for the self-rental tax strategy to work.
Speaker 1:Now what if you own a business with your partner let's say you're a 50-50 partner over here on a business and you own 100% of the property which rents to you then unfortunately, you cannot use this tax strategy. You've got to make sure you pay a fair market value rent. Okay, treat it as a legit business and legit rental, as if you had a landlord to whom you pay rent. When you do that and you follow all these guidelines and regulations and make it legitimate, have a documentation IRS will allow you to use 100% of this tax strategy. Now, pay fair market value rent. Also, remember that it's got to be separate entities. Now, it doesn't matter if the property is not in a separate LLC. Okay, that's okay, it can be under your personal name as well for this strategy to work. But keep them separate. Remember, the business has to be a pass-through entity. If it's a C corporation, this tax strategy is not going to work. Now you want to make sure it's an S corporation or a pass-through entity. Now you've got a property over here. You're paying a monthly rent.
Speaker 1:Most important thing that a lot of accountants don't do and don't know about this tax strategy is that they do not make an election on the tax return to combine these two activities. And the election must say we are combining, or a taxpayer is combining his businesses, his rental, as one activity. When you combine it as one activity, any losses generated by the rental property that you rent to yourself can be deducted against your business profits. If you don't make such an election, you will not be able to take that loss and you fall into the self-rental trap that we spoke about, because rental income from self-rental is not passive and the rental loss are passive. So it's a huge, huge blow. But that's okay. Irs gives you a way out, because IRS says look, you're renting to yourself, we're going to consider it as a one entity, but in order for you to be able to take that loss against your business profits. You have to make a proper election.
Speaker 1:One last thing I want to add over here what if you own the business 100%, either you or your spouse, but the property is a multi-tenant property? Right, it's a commercial property. You've got three tenants One is you and two others are other tenants. You can still use this tax strategy for the portion of the property that you occupy as a tenant. It's a really, really amazing tax strategy that we use for most of our tax advisory clients that have a self-rental.
Speaker 1:Of course, there is documentation involved, there is tax strategy, there is an election, there's properly filing a tax return and we do all of that for all of our clients, but we only do it for them. Ladies and gentlemen, you have to understand we, as a tax advisory firm, are only able to help our clients to save money on taxes simply because we meet with them at least four times a year. We communicate Communication is the key with your accountant. If you're working with an accountant and you only speak to them during the tax time filing time or they're ignoring you, you send them an email and you hear back in three days, or you send them an email and they say oh sorry, you're going on extension, I have no time. Well, guess what? You need to get a tax advisor so that you can implement tax strategies as a self-rental. Thank you Till the next time.
Speaker 2:That's it for today's episode. Be sure to check out the description below for some free tax reduction resources that Boris put together for you. If you're ready to work with a tax advisor on your tax planning, be sure to schedule your call by heading over to wwwtaxplanningcallcom. That's wwwtaxplanningcallcom. And be sure to subscribe to our podcast to be notified when the next strategy is released.