Take 5
Money Saving Tax Strategies for Realtors® 
with Chris Bird
TRT: 4m 26s
Video Transcription

Chris Bird directly addresses camera:  Just because you're self-employed doesn't mean everything is deductible, yet that myth persists in the real estate industry.
My name is Chris Bird. I was an IRS agent for nearly 17 years and now I travel the country educating Realtors® about tax planning and tax write-offs. Let's take five minutes to learn how to find the right accountant, PLUS several tax-planning strategy issues you need to know about.
Rather than scouring the University of the Internet to find out if something is tax deductible, the VERY first thing you must do is find a competent tax professional, which could be either a CPA or an enrolled agent. An enrolled agent passed a tough two-day IRS examination, and many of them are ex IRS Agents. This is not to say that a tax professional without one of these credentials is not competent, but the chances of finding a good one are better.
How do you know if a tax professional is good?
Look for someone who offers more than just a drop-off point for your documents. If you're dropping off your documents and picking them up two weeks later without any real conversation, you're not getting the full value of their services. You should meet with this person throughout the year. A good tax professional will also have other successful real estate professionals as clients and, if you are lucky, may also own rental properties — important if you are also an investor.
Now, let's get down to strategy. Some of the biggest deductions people often miss are related to the business of real estate and owning rental properties. These include tax laws relating to depreciation of business assets, Section 179 deductions and bonus depreciation. All of these can significantly reduce your tax liability.
What's more, a common mistake is trying to reduce your income to the lowest possible amount every year. While no one wants to pay more tax than necessary, it's essential to understand the collateral damage of this approach. It can affect your ability to purchase property (lower income can result in limited borrowing power), retirement planning, and even use up your 15% tax bracket, one of the lowest tax rates you encounter every year.
For instance, if you plan to buy a heavy SUV, (over 6,000 lbs. GVWR), I wouldn't advise writing it off in total so you use up part or all of your 15% tax bracket. Instead, take it to reduce your taxable income at the 28%, 30% or 35% tax bracket. Let's say your write-off is $50,000. At the 15% tax bracket, you save $7,500. But if you're in the 30% tax bracket, your tax savings double to $15,000. How do you do this? Depreciate the asset over five years, or only use a specific amount of the first-year expensing election under IRC 179 instead of the entire cost.
An issue that is just now coming to light is that in 2024, under the Corporate Transparency Act (CTA), your accountant (or you) will have to file a report with the Financial Crimes Network (FINCEN) listing the owners of the entity. This includes all small businesses that have set up any corporation (S or C), partnership, or limited liability company (LLC) and had to file documents with the state to form. I am alerting you to this to be ready for the issue when you see your accountant early in 2024.
Having a competent tax professional can save you a lot of money. They can help you plan your taxes and avoid common mistakes. Remember, the goal isn't just to pay the least amount of tax, but to build a successful financial future.
Only some things you spend money on are deductible, and it's crucial to understand the difference between personal and business expenses to avoid unnecessary complications with the IRS. That's why having a competent tax professional is so important; they can help you distinguish between the two and make the most out of your legitimate business deductions.