If you are under age 59 ½ , then you might have to pay a penalty to get your hands on your 401K or IRA funds. If you were impacted by COVID in 2020, then you can withdrawal up to 100K from these retirement plans by the end of 2020 and not have to pay the 10% penalty. In addition, you can spread the income out over 3 years (pay tax on it evenly in 2020, 2021, and 2022)
Rental losses are passive losses and are not typically able to be used to reduce your ordinary income. But if your AGI is under $100,000, you can deduct up to $25,000 of your rental loss. If you are a real estate professional you can deduct all of your rental loss no matter what your income is. Using cost-segregation strategies, we can make sure that your rental shows a loss on your tax return, even if it produces positive cash-flow.
A Roth IRA is one of the best wealth transfer vehicles available: You contribute money, that money grows, you never have to take the money out while you are alive, you die and your spouse doesn’t have to take money out and the money continues to grow, then your kids have 10 years to drain the account after your spouse dies. This means that the $7K you contributed this year might be able to grow 50 years AND all of the growth is tax-free.
Purchase a fixer-upper and live in the house for 2 years before selling. Up to $500,000 of the gain is tax free. Repeat every 2 years.
If you have a child in college, then contribute $5K to the Indiana CollegeChoice 529, and then turn around and put that money back into your personal checking account. You don’t need to leave the 529 funds in the 529 to get the $1K Indiana tax credit (i.e., save $1K of Indiana tax each year you do this).
You can receive up to a $200 credit on your Indiana state return. Contributions include the $25 Group Fee for a Indiana College vehicle license plate.
These improvements include water heaters, HVAC systems, windows, exteriors doors, etc. You can receive up to a $500 credit on your federal tax return from these improvements.
There are many tricks (or combination of tricks) to make sure that the college expense produces tax savings:
• Take the AOC or LLC college credit up to $2,500
• Deduct the tuition and fees
• Don’t claim the child as a dependent and let the child claim himself and take the AOC credit
• Make a portion of the child’s scholarships taxable on child’s return to “free up” tuition for the AOC credit
• Withdraw college funds from your Traditional IRA and avoid the 10% early withdrawal penalty
• Contribute $5K to the Indiana 529 and then turn around and withdraw it to pay for college and save $1K in tax
• Hire the child in your corporation and deduct his or her tuition