Tax Strategies and Investment Concepts (Video Notes)

Tax Shelters, Entities, & Business Structure

• Pacing one tax‐shelter investment inside another creates a tax liability rather than an additional shield.
• "Government-qualified" retirement plans transfer control of your money to the government; withdrawals are taxed and rules are rigid.
• TAX TIP – Turn an active business into a passive investment:
  • Once it is classified as passive, \text{real-estate losses} can offset \text{business income}.
• Enterprise Zones (EZs) – geographic areas governments want to develop.
  • Locate, lease, or purchase a building in an EZ → potential tax credit.
  • Hire employees who work in an EZ → employment tax credits.
• Start-Up-Cost Timing
  • Begin deducting in the first tax year the business begins.
  • If the IRS later claims you started “too early,” you may still amortize in later years, but never miss the initial window.

Core Business-Tax Tools

• TAX CREDITS
  1. Building located in an EZ
  2. Hiring EZ workers
  3. Hiring specific classes of employees (e.g., veterans, disabled)
  4. Expanding total workforce
  5. Purchasing qualifying business equipment
  6. Research & Development (R&D)
• DEDUCTIONS
  1. Travel
  2. Meals
  3. Auto expenses
  4. Medical expenses (through properly structured plans)
  5. Depreciation of capital assets
  6. Salaries & wages
• Tax-Bracket Engineering – Use multiple entity types (LLC, S-Corp, C-Corp, Trust) to shift income into lower brackets.
• RULE 16 – “The single best tax shelter in most countries is \text{rental real estate}.”

Real-Estate Strategies

• TAX TIP – In many countries the sale of a primary residence is tax-free.
  • Strategy: periodically sell and upgrade homes to harvest gains.
  • WARNING – Do not treat your home primarily as a speculative flip; buy it to live in, treat gains as a bonus.