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Taxes Are Not Always Inevitable

By TaxWealth -

When you sell a capital asset like property or a business, you often owe a hefty tax on the net profit.

There are clauses, though, within the tax code that may provide relief. You just have to know where to look, as the IRS is not in the business of pointing out the parts of the code that limit revenue collection!

As an example, in our work as tax planners (a separate discipline from CPAs) we see too many property owners failing to understand how accelerated depreciation works, or how owning multiple properties may be managed in tandem to reduce the tax bill on a particular sale. One client spent most of his time managing his real estate portfolio, but was declaring himself a medical professional to the IRS. This cut him off from tax benefits that accrue to real estate professionals.

You need to follow the law, but a savvy tax planning guide can take you through the bureaucratic jungle known as the Tax Code and find the patches of code that most benefit you.

Congress Encouraging Us to Lower Taxes? Is That Really Possible?

Yes. Laws exist that allow us to minimize our taxes if we manage our financial affairs in specific ways. Many of these laws have been on the books and available to us for many years, but they languish unfound amidst the thousands of pages of IRS regulations. Most taxpayers, unfortunately, are not aware of them and how they can be applied to significantly lower taxes and increase their own income and wealth.

To illustrate, a 54 year-old investor was troubled about her real estate portfolio valued at $800,000. She wanted to sell the properties, replace the income provided by her rentals and reduce her income taxes. She was stunned when her CPA told her she would be obligated to pay more than $200,000 in capital gains taxes if the properties were sold and that little, if anything, could be done to lower those income taxes.

A friend suggested that she contact a qualified tax planner for a second opinion. After discussing the situation with her, an analysis was done of each property. The diagnosis reported an immediate refund of income taxes she unknowingly overpaid and that no capital gains taxes would be due if the properties were sold. Other tax-saving opportunities were also discovered about which her CPA was unfamiliar.

She happily received her tax refund, sold the property and paid no capital gains taxes. She now enjoys more income than she had before and will not pay income taxes for some years to come because of the added tax benefits that were found.

A little time invested on education and knowing your options can make all the difference to your bottom line. Fortunately, you have resources who can help.

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