The IRS Doesn’t Want You To Know This (But The Rich Use It Daily)

"The IRS says that you can deduct ordinary and necessary expenses from your business's revenue."

"And now when you're being paid as a 1099, well, you can have them pay you into your business account, into your LLC as opposed to into your personal account."

"The IRS says you get to pay lower tax rates when you earn your money as an investor versus when you earn your money as an employee."

"These are called the long-term capital gains rates. So, you're going to pay 10% of your income in taxes up to $48,350. Then, you're going to pay 15% of your income in taxes up to $533,400. And then the top tax rate is 20% which you're going to pay above $533,400."

"If you invest your money into Treasury bonds, the income that you make from Treasury bonds, which is right now four to 5% a year in interest, is generally taxfree at the state level."

"You could potentially look at ETFs like SG OV, which give you exposure to short-term Treasury bonds, where you can get those monthly interest payments of around 4.7% a year at the time of me recording this video."

"The IRS says if this property is a single family home, which that's what this picture is, you take the value of the property, the $250,000 you paid for the land and the building, subtract the value of the land, which is $50,000. So, you take the $200,000, the value of the property, and you divide that by 27 12."

"Instead, you're going to do a much bigger depreciation because this is what your accountant can do. They can look at different things in your building, in your property, and say, 'Hm, instead, we're going to take a $35,000 depreciation in year 1.'"

"If you make $100,000 a year or less, you can deduct up to a $25,000 loss against your income, which means in this situation, you're making $100,000 a year. You have the $25,000 loss in your properties. Now, you pay taxes on only $75,000."

"But if you are a real estate professional, meaning most of your time is spent actively taking care of your properties, actively working in real estate, well, now you can make over $100,000 a year and take this loss and deduct it against your active income."

"Well, now you can take this loss against your active income if this is a short-term rental as opposed to a long-term rental property."

"I could do a 1031 exchange. And this 1031 exchange says I can take all $500,000 in proceeds from this sale, pay $0 in taxes today, go out and buy another property with all $500,000."

"This way you can compound the value of your wealth. Now, of course, there's a lot of nuances here. It takes work. It takes time. And if you're going to do a 1031 exchange, get a specialist because there's a lot of rules."

"If you make $80,000 a year from your job, you need to make $80,000 a year from your investment income to be able to quit your job and live your life without changing anything you're doing."