Tax Strategies from Care Act 2020

Wealth can be created by taking advantage of the tax laws. This year has been a historical one and the Care Act is something you should be mindful of. Keep in mind that the Government writes laws to show you where that want you to be investing and tax is a form of stimulus. 

As a real estate investor, you need to be proactive in planning what you will invest in. You need to position yourself to mitigate risk or take advantage of future changes. 

Author of Tax-Free Wealth, Tom Wheelwright shared some nuggets on The Real Estate Guys on the Care Act of 2020. 

  • Care Act allows you to go back to 2018 and take bonus depreciation on Qualified Improvement Program for Commercial Properties. For example, when a tenant moves out and you make improvements to that unit, you can now take those deductions. Care act allows you to do a catch up and take bonus depreciation. 
  • If you are a RE Professional/Investor you may qualify for the Care Act. If you had a reduction in hrs., you should consider leveraging the care act. and don’t want your funds locked in an IRA, you should consider if you qualify. You can pull out up to $100K from 401K or IRA. This allows you to take a loan and leverage your funds without receiving an early withdrawal penalty or leverage the funds and pay it back.  
  • With the Care act, we are now able to carry back Net Operating Losses all back to 2018 and do a five year carry back which allows you to go back five years to 2013, 2014, 2015. If you weren’t doing real estate back then, but you had started investing as a real estate professional, you can now take bonus deprecation back to years that you may have been profitable. This carry back is providing refunds which are adding dollars back into the system hence the stimulus the government is seeking. This may end quickly because the House of Representative has already proposed getting rid of it.  
  • Charitable Deduction – Used to only be 60%, but with the 2020 Care Act you can deduct 100% of your donations. 

Overview of Economic Injury Disaster Loans:

EIDL Grant – $1000 per employee up to $10K Grant. PPP Loans are forgiven. However, if you got both, then the amount of the grant isn’t forgivable and now you have to pay it back. EIDL Grant is part of the PPP Loan which many didn’t realize. This helps RE Investors who have tenants that aren’t paying. 

PPP – 30 Yr. Loan up to $150K, 3.75 % with deferred payments up to a year. You never know when you’re going to need cash. Best time to borrow is when you don’t need the money. It’s great to have cash on hand. 

Mainstreet Loan Program – Loan from the Federal Reserve directly to the banks. Banks lend the money and the feds take it over. Terms can be really good. 

Tax Planning should be happening now. Now more than ever, you should get your affairs in order now with you CPA. 

Implications of proposed tax plan if Biden wins the election:

  • Get rid of all the stimulus outside of handout stimulus
  • Get rid of all tax incentives 
  • Get rid of bonus depreciation
  • Eliminate 1031s
  • Eliminate Basis Step up 
  • Eliminate Capital Gain Increase on any gain in excess of $1M
  • Eliminate Oil and Gas Tax Benefits
  • Eliminate Non-Taxed Health Care Benefits
  • Raise Corp and individual Income Tax
  • Eliminate Conservation Benefit
  • Tax SS for those making $400K+
  • Will he add a wealth tax that you would pay every year?

Today is the best time to preparing for tomorrow. Want to learn more or talk in person, feel free to schedule a call with me or send me an email at LighthouseVenturesKC.com. Happy investing!

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