FEDERAL INCOME TAXES AFFECTING REAL ESTATE
The proverbial “wise and prudent person” is expected to practice tax avoidance. The courts have consistently ruled that every tax payer is allowed to legally avoid as much of the income tax as they can.
Federal tax law divides income into two categories: ordinary income and capital gains. Ordinary income is wages, salaries, professional fees, commissions, bonuses, and normal business income. Capital Gains are gain or profit from selling a capital asset like Real Estate. There is much political talk today about capital gains rates because the capital gains rate is generally lower than the rate for ordinary income. However, if your ordinary income is low for a year, and you are in a lower tax bracket, you may be better off claiming profits from your capital investment as ordinary income.
Your Uncle Sam has put a heavy tax on most ordinary income. The payroll tax is a sever tax for both the employee and the employer. You are also taxed on most of the money you need for living expenses, unless you can fill out the long 1040 and deduct some of your living costs. The capital gains, on the other hand, are only levied on the profits of a capital venture and not the costs. This allows investors and business men and women to avoid the onerous and inequitable taxes on ordinary income.
By investing in Real Estate you are accumulating capital profits and as such they are not taxed as ordinary income. Even the capital gains can be deferred as long as you would like, even for a life time. You just keep reinvesting any profits into another capital investment or the same or equal value. This way you can accumulate wealth that will pay you ordinary income in ever increasing amounts. For example, you buy a rental home, keep it for several years and sell it, and then you take all your original investment and all you capital profits and invest in another rental until you own a rental free and clear. Now all the rents are pure profits for your retirement, kid’s college fund, or whatever.
The only one who will protect you and your assets is You. The savvy Buyers are hiring a PROFESSIONAL REAL ESTATE BROKER like MARK ENGLISH REAL ESTATE to represent their needs, wants, and desires exclusively. Please, give us a call and let’s review all Your options. We are an EVERGREEN COLORADO CUSTOM HOME BUILDER as well as MARK ENGLISH REAL ESTATE and DISCOUNT MORTGAGE SERVICES. We know land and we know financing and will work hard to prosper You. Contact us at 303-674-0148, Email us at markenglishrealestate@msn.com or visit us on the web at www.evergreencoloradoliving.com . Don’t forget to register for our FREE REAL ESTATE OR MORTGAGE BUYER INCENTIVES.