This video was a huge help. Real estate tax benefits explained in a nutshell without trying to mystify anything or complicate things. Love it! Most people can't explain it in a simple way because they don't understand it.
The kitchen example would actually be depreciated at 5 years for the cabinets,crown molding etc and 7 years for the lighting 15 years for the flooring aside from carpets. The savings would be far more than what was described, for a $10k kitchen alone it’s probably $1,500 a year in extra depreciation expense write offs. This could be applied to the whole house and just wipe out the income entirely and then some, resulting in a carry forward for the additional write offs. Graham is right though, depreciation can put money in your pocket as a realtor I️ have all my investor clients do cost segregation and they instantly make more money and more cash flow because of I️t.
How would wiping out the income on paper affect the value of the property? For example if i wanted to sell the next year but tax papers show a loss due to write off.
Viola bought a small apartment building and sold it six years later for $300,000. Her starting basis was $200,000. During the time she owned the property she took $43,000 in depreciation deductions and paid $13,000 for a new roof (an improvement). Her depreciation deductions reduced the property's basis, but the roof improvement increased it. Her basis at the time of the sale is $170,000. Viola calculates her taxable gain on the property by subtracting her adjusted basis from the sales price: $300,000 - $170,000 = $130,000. As you can see, when you sell your property, you effectively give back the depreciation deductions you took on it. Since they reduce your adjusted basis, they increase your taxable gain. Thus, Viola’s taxable gain was increased by the $43,000 in depreciation deductions she took. The amount of your gain attributable to the depreciation deductions you took in prior years is taxed at a single 25% rate. Viola, for example, would have to pay a 25% tax on the $43,000 in depreciation deductions she received. The remaining gain on the sale is taxed at capital gains rates (usually 15%, 20% for taxpayers in the top tax bracket). So basically there is no benefit to depreciate property. Uncle Sam will get you either now or later. Correct? Can you explain your theory that you do not need to pay tax after write off? I do not understand how it can work that way...
These reasons on top of others makes real estate investing so advantageous over other types of investment. The concept of "paper loss" from a tax perspective really equates to more money in the investor's bank. Another quality video Gram. Keep it up man.
Your explanations and examples are very helpful. Thank you for making the complicated world tax deductions understandable and the benefits of owning real estate investments.
this is one of your best videos, graham, very concise and informative, easy to understand with the examples on the left. do you have any idea if an international investor can claim the same benefits if forming an LLC on the US to hold the properties? im considering doing that.
If one breaks even on rental income and expenses like mortgage, taxes etc..., could they get the tax benefits of their rental property applied onto their main income source? Or is it applied only to the rental property income.
Losses from passive income can't be written off against ordinary income under current tax law. However if you spend enough time working in real estate to be classified as a real estate profesional (I think 200 hours per year) then you may be able to.
Dreading the day of 1000's of receipts on my table.. I could give all to my accountant but I kinda like seeing what's going on in the business and where I've under or over spent.
@@GrahamStephan you're welcome man. You deserve it. I appreciate your work and all the great advice you give. I've been binge watching all your vids. Keep it up man! 👍
This was great, thanks, I've been looking for "investment techniques for creating passive income" for a while now, and I think this has helped. Have you heard people talk about - Qonmily Passive Formality - (search on google ) ? Ive heard some incredible things about it and my friend got amazing results with it.
Hi Graham I did not leverage my money in real estate and still made a killing in Phoenix, AZ. The home prices went way up and I bought many of my homes (23) in cash. So, I did not leverage and made a killing, so at 3:15 mark your wrong, sorry. I get what your trying to communicate that leveraging often leads to bigger returns but that is not what you said.
Can I depreciate 3/4 of my 4 bedroom primary residence if I live in one bedroom and rent out the extra 3 bedrooms ? Can I depreciate I even if is a investment property ?
Hey, Graham. These are awesome tips for tax write offs, but before you ever buy a property, is there any kind of quick calculation you do to just get a rough estimation of how much you would be paying or saving in taxes?
Great video. However the new 2018 tax reform law requires the owner to live in their personal residence for 5 out of 8 years now for the homeowners exclusion benefit.
I am confused about what graham says around the 3:00 mark: it’s better to buy property on a loan than in cash. I’m confused because you’re paying interest if you use a loan, and even if you can then write that off on your taxes… you’re just paying less tax, but still spending money on interest. I find it hard to believe that the money I save by reducing my taxable income could amount to more than the interest payments. What am I missing?
Was just reading about 1031 today in Rich dad poor dad. Cool book and gread vids, keep them coming with such great content. You should do a vid about the books and courses and ways you have educated yourself.
I am wondering where can one find were all if this is written? How can I check for myself? I want to learn more about the potential tax breaks from investment real-estate and stocks. So where could I go to learn what books to buy?
@@GrahamStephan how do you keep your personal property from not being involved as assets in a lawsuit from one of your tenants if the properties are under your name?
I’m new to all this rental property, so need a bit of advice I’ll be buying this 2 unit building renting out of the units and living in the other for now as this is my first property 🤗🤗 So would I smart thing of me to get EIN and take out a business credit card for any expenses on the property Or should I just get a new bank account and a credit card just for the expense?
Depreciation lowers the cost basis of the property, sooo then if you sell higher capital gains unless you sell and roll over to Starker exchange. As someone who has seen this in action, sometimes paying capital gains is good. Why??!!! Because you can loose out on being able to look and take your time to find the better deal, or better property..
Thank you for explaining so much of this A do have a question So if I bay a single family home as my residence and market value is 250 k but town accestment is 150 k for the house and 40 k for the land I get tax benefits ( which are 150 k devide by 27.2 ) is that correct for every year as long as I live in the house or own the property And my other question would be duplex with some numbers I am living in one unit and renting other one will tax assessments credit ramain as long as i keep the property or it changed in some point And this is different tax benefit then deprisiasion is that correct Thank you
Fun fact: when you die and the beneficiaries of your estate receive your property it's tax basis is reset to its fair market value at the time of your death. This means if you 1031 your whole life when you die the capital gain can be dodged. (I'm not a CPA just an accounting undergrad, this is not legal advice).
Do you have any books you recommend reading that goes into depth about what you have covered here? I know you have a video about self help books, but what about us landlords?? Great video as usual
Graham - once you do a 1031 Exchange, do you start the depreciation on the new property again by 27.5yrs? or up to whatever years are left on the original property?
Can you please make a video on how to get your real estate license in California. I keep getting conflicting answers. If you already have one link me please! Thanks
D M short answer is yes. Usually it's 180 days after the sell of property. Plus some corky rules where you'll need a escrow agent to hold the gains of your proceeds until you can roll over the funds. Do a quick Google search on it. Good luck.
Hi Graham from the past, I actually really miss quality vids like this if you see this comment. Also, funny how BTC was on the rise and in a huge bubble when you made this video. And now it seems cheap compared to today.
Graham love the videos, i've been watching them for a long time now. one question i have for you is, what kind of write-offs could i have being a land investor? i've just recently started investing in big tracts of land and flipping them. but i'm starting to get to the point where taxes are going to kill me this year if i don't do something, id love some advice.
If you make 10k in rental income and have 10k in deductions then you pay zero taxes on that money if the deductions are more than the rental income then you can take the difference off your regular job income.
Hey Graham, great video as always...I currently own one property that I live in and rent out one of the rooms. I'm thinking about doing a cash out refinance or some other way to take out the equity to buy a rental property. Do you think that's a good idea, or am I better off just getting a new loan for that new property ?
suttsd i currently own a duplex and rent the other and have considered this as one of the next steps for another investment property. Cash out refi is a creative strategy to leverage your current property to purchase another one. You will have to consider the pro and cons to doing a cash out refi. Keep in mind that is you do a cash out refi, the "borrowers money" is added to your current mortgage which extends out the maturity date and and increases your payment. But overall, if this increase can be offset by the increase of rental income. Good luck.
Did you do any forced appreciation with strategic renos? or did the area appreciate? It doesn't hurt to get the appraiser in and see what your options are. (could cost few hundred bucks for him but worth it)
Jeff Wybo hey Jeff, it's a bit of both..the area appreciated in value and I renovated the flooring throughout the house..wood floors upstairs and nice large ceramic tiles downstairs.
tou her thanks for your reply and congrats on owning a duplex. I have the 25 % down payment needed but I was just wondering if there are any additional benefits as to why a person would want to do a refinance instead of just getting a second mortgage
This video was a huge help. Real estate tax benefits explained in a nutshell without trying to mystify anything or complicate things. Love it! Most people can't explain it in a simple way because they don't understand it.
Can you make an updated video on this topic with the updated tax laws. I have many investors that I would love to share this information with.
Once again Graham delivers with extremely valuable information. Thank you, Graham, for sharing with us and spreading the wealth!
Thanks so much for watching Shawn!
A little joint, a little “getting stoned”
The kitchen example would actually be depreciated at 5 years for the cabinets,crown molding etc and 7 years for the lighting 15 years for the flooring aside from carpets. The savings would be far more than what was described, for a $10k kitchen alone it’s probably $1,500 a year in extra depreciation expense write offs. This could be applied to the whole house and just wipe out the income entirely and then some, resulting in a carry forward for the additional write offs. Graham is right though, depreciation can put money in your pocket as a realtor I️ have all my investor clients do cost segregation and they instantly make more money and more cash flow because of I️t.
Sometimes for the kitchen you can "repair" the kitchen vs "renovating" the kitchen but I'd run that by your CPA.
Jake the GOAT!
Jake, thank you so much for the info.
Can you apply both the 27.5 depreciation and cost segregation to a property? Or is it one or the other
How would wiping out the income on paper affect the value of the property? For example if i wanted to sell the next year but tax papers show a loss due to write off.
People need to realize the tax code was written by landlords :D
They have the 1031 in nearly every country just different name!
@@mikeanderson9266 Do you know the know for this in Canada?
I'm new to this arena and now getting educated.
👨🏼🦯👨🏼🦯👨🏼🦯👨🏼🦯👨🏼🦯
Slave owners
Viola bought a small apartment building and sold it six years later for $300,000. Her starting basis was $200,000. During the time she owned the property she took $43,000 in depreciation deductions and paid $13,000 for a new roof (an improvement). Her depreciation deductions reduced the property's basis, but the roof improvement increased it. Her basis at the time of the sale is $170,000. Viola calculates her taxable gain on the property by subtracting her adjusted basis from the sales price: $300,000 - $170,000 = $130,000.
As you can see, when you sell your property, you effectively give back the depreciation deductions you took on it. Since they reduce your adjusted basis, they increase your taxable gain. Thus, Viola’s taxable gain was increased by the $43,000 in depreciation deductions she took. The amount of your gain attributable to the depreciation deductions you took in prior years is taxed at a single 25% rate. Viola, for example, would have to pay a 25% tax on the $43,000 in depreciation deductions she received. The remaining gain on the sale is taxed at capital gains rates (usually 15%, 20% for taxpayers in the top tax bracket).
So basically there is no benefit to depreciate property. Uncle Sam will get you either now or later. Correct?
Can you explain your theory that you do not need to pay tax after write off? I do not understand how it can work that way...
Thank you for this video. There are so many people that don’t understand business taxes including myself. You’re break down is simple to understand
Thanks!
These reasons on top of others makes real estate investing so advantageous over other types of investment. The concept of "paper loss" from a tax perspective really equates to more money in the investor's bank. Another quality video Gram. Keep it up man.
Thank you!
I had to buy a notepad to watch your videos man. Good info.
Ha thanks so much!
You the man. Love your vids. Keep it up
Thanks!
The tax advantages to real estate are SO awesome, especially when compared to simple job income.
AGREED!!
Oh wow!!! Thank you so much for this one! So excellent... Love you Graham!
Thank so much!
Video request: what is it better to buy real state as a person or a business. Thank you.
Your explanations and examples are very helpful. Thank you for making the complicated world tax deductions understandable and the benefits of owning real estate investments.
Im about to find out what my tax benefits are in a triplex i bought in September of last year. Thanks for the info as well.
This is soo informative, thanks graham
Thanks for watching!
The tempo is much better. Not too fast and not to slow. And thank you for the valuable tax info
You explain so good, I was trying to learn all these since 2days ago. But now I learned after watching your video 👍🌺
Graham, Thank you so much. You are a treasure trove of information! I thank God for you!
Gotta respect the Mac Miller beast as background music
Hey Graham! Great content, thank you so much! Could you make a video more specifically on write-offs for a primary residence?
this is one of your best videos, graham, very concise and informative, easy to understand with the examples on the left.
do you have any idea if an international investor can claim the same benefits if forming an LLC on the US to hold the properties? im considering doing that.
Thanks so much!! Really means a lot to hear. Good question, definitely something for a CPA - not sure about that.
Can you do more videos about buying real estate for first time home buyers for their primary residence?
Sure!
If one breaks even on rental income and expenses like mortgage, taxes etc..., could they get the tax benefits of their rental property applied onto their main income source? Or is it applied only to the rental property income.
Losses from passive income can't be written off against ordinary income under current tax law. However if you spend enough time working in real estate to be classified as a real estate profesional (I think 200 hours per year) then you may be able to.
Do you recommend having an LLC for the tax benefits and asset protection for real estate?
th-cam.com/video/XdSp5GXbiE4/w-d-xo.html LLC's are the way to go for both individual and asset protection
Does having just a million dollar umbrella policy do the same as having a llc?
I sold my apartments for 1.5 mil and did 1031 into a DST. Made sense to create an income stream.
graham always with the fire. thanks for the info.
Thanks Alex!
Had to come back & rewatch in 2021!! Loving this info!
Video request: low maintenance landscaping ideas for duplex/fourplex rentals please.
🙌🏼
Awesome Info Graham.
Thanks for keeping us informed especially Tax time is coming up soon.
Thanks man!
Dreading the day of 1000's of receipts on my table.. I could give all to my accountant but I kinda like seeing what's going on in the business and where I've under or over spent.
Hey, I was your 1000th like!
Thank you!!
@@GrahamStephan you're welcome man. You deserve it. I appreciate your work and all the great advice you give. I've been binge watching all your vids. Keep it up man! 👍
Graham is so smart and handsome
Rubi Masias He does have that handsome crypto glow.
This was great, thanks, I've been looking for "investment techniques for creating passive income" for a while now, and I think this has helped. Have you heard people talk about - Qonmily Passive Formality - (search on google ) ? Ive heard some incredible things about it and my friend got amazing results with it.
Especially when he’s stoned
@Son of Dad SIIIIIMP jk
Good quality informational content. Keep these videos coming por favor 👍
Thanks man! You got it!
Too late Graham, I already liked this video.
Great video as always! Any chance of a future video on the pros and cons of holding properties under your name versus an LLC?
I probably won't go into too much depth on those types of topics since it's so specific!
I noticed that you still haven’t done a video about tax right offs. Please make a video explaining it and advices
.....
Hi Graham I did not leverage my money in real estate and still made a killing in Phoenix, AZ. The home prices went way up and I bought many of my homes (23) in cash. So, I did not leverage and made a killing, so at 3:15 mark your wrong, sorry. I get what your trying to communicate that leveraging often leads to bigger returns but that is not what you said.
Wow. This is way over my head.
it kind of is for me too, but it'll be SO worth it, beginning to understand it !
Hey Stephan, loved the video as always. Would you consider doing a video on tax benefits and trick to being a real estate agent? Thanks in advance
Can I depreciate 3/4 of my 4 bedroom primary residence if I live in one bedroom and rent out the extra 3 bedrooms ? Can I depreciate I even if is a investment property ?
Great information! Keep up with the good work.
Thanks so much!
I’m here!! Notifications turned on :)
WOOHOO! Thank you so much for the support!
Great video Graham! I’m going to mention this on my channel!
Great tips as always!!!
THANKS JEFF!
That shirt at the beginning was awesome! I want one!
Haha agreed! I got it as a gift!
Hey, Graham. These are awesome tips for tax write offs, but before you ever buy a property, is there any kind of quick calculation you do to just get a rough estimation of how much you would be paying or saving in taxes?
Great video and information. Thanks so much for creating this. I'm just now learning about real estate and taxes.
Great video. However the new 2018 tax reform law requires the owner to live in their personal residence for 5 out of 8 years now for the homeowners exclusion benefit.
I'll cover this next week. They didn't change the capital gains exclusion, they kept it at 2/5 years!
GrahamStephan oh really? That’s good to hear. I’ll have to look into it.
2/5 years of getting stoned!
Great video. Round of applause
I am confused about what graham says around the 3:00 mark: it’s better to buy property on a loan than in cash. I’m confused because you’re paying interest if you use a loan, and even if you can then write that off on your taxes… you’re just paying less tax, but still spending money on interest. I find it hard to believe that the money I save by reducing my taxable income could amount to more than the interest payments. What am I missing?
Was just reading about 1031 today in Rich dad poor dad. Cool book and gread vids, keep them coming with such great content. You should do a vid about the books and courses and ways you have educated yourself.
Thanks so much!
Everytime you say 1031 exchange it hurts my heart.. -Canadian
I am wondering where can one find were all if this is written? How can I check for myself? I want to learn more about the potential tax breaks from investment real-estate and stocks. So where could I go to learn what books to buy?
Do you suggest we buy real estate as an individual or under an LLC?
LLC ideally depending on how much it is and what state. I have it under my personal name with no issues.
@@GrahamStephan how do you keep your personal property from not being involved as assets in a lawsuit from one of your tenants if the properties are under your name?
I’m new to all this rental property, so need a bit of advice I’ll be buying this 2 unit building renting out of the units and living in the other for now as this is my first property 🤗🤗
So would I smart thing of me to get EIN and take out a business credit card for any expenses on the property
Or should I just get a new bank account and a credit card just for the expense?
Classic Graham. Golden!!
😜🙌🏼
automatic like just for the shirt!
Wow I’ve been watching you for so long yet I never knew all of this was tax deductible
What income ?? Especially when your tenants give you cash
😉
Cash king. Can’t track it.
I am giving an old friend another try but the window is closing quick for this half ownership Ian fine either way . Thanks for your info.
Thanks so much for this video. I have been wondering what I could save for a while now
🙌🏼
Great video. Thank you Graham! Question: Do you recommend using an LLC, Land trust, etc. When investing in real estate?
thanks!! and not needed!
Depreciation lowers the cost basis of the property, sooo then if you sell higher capital gains unless you sell and roll over to Starker exchange.
As someone who has seen this in action, sometimes paying capital gains is good. Why??!!! Because you can loose out on being able to look and take your time to find the better deal, or better property..
#yessss great benefits, loved the video Graham thanks again!
Thank you!!
Thanks Graham, you always teach me something new. Do you know if this 1031 Exchange applies in Canada too?
Good question! Check out Matt McKeever's channel, he does real estate in Canada!
It does not :(
Thank you for explaining so much of this
A do have a question
So if I bay a single family home as my residence and market value is 250 k but town accestment is 150 k for the house and 40 k for the land I get tax benefits ( which are 150 k devide by 27.2 ) is that correct for every year as long as I live in the house or own the property
And my other question would be duplex with some numbers I am living in one unit and renting other one will tax assessments credit ramain as long as i keep the property or it changed in some point
And this is different tax benefit then deprisiasion is that correct
Thank you
Can we do depreciation with single family home
Thanks for the information ill be looking into this. You are super smart and enjoy learning from you.
Thanks so much!
Great video Graham can this be done with apartments as well?
Yes!
How does the President's new Tax Bill from last year affect your taxes?
Hey Graham, thanks for another great video! Do you use an accountant to find all these tax breaks?
Yes I do!
@@GrahamStephan Great video. Can you share your accountant? I want to work with him.
Make a video on why having a dream is so important to achieve success
I have a little of that in tomorrow's video, will post it sometime around 9/10am!
my dream is for your dream not to come true
'You can leverage debt and claim write offs against your profits'. *Dave Ramsey has entered the chat*
Do you recommend using an LLC
th-cam.com/video/XdSp5GXbiE4/w-d-xo.html LLC's are the way to go for both individual and asset protection
Fun fact: when you die and the beneficiaries of your estate receive your property it's tax basis is reset to its fair market value at the time of your death. This means if you 1031 your whole life when you die the capital gain can be dodged. (I'm not a CPA just an accounting undergrad, this is not legal advice).
Thanks for your videos!! I look forward to every video😊
Thank you!
Now I see how I sound trying to explain real estate investing to some one
But if I understand this correctly you do get the tax break from the morgage but its not so great that it is more then the interest.
Do you have any books you recommend reading that goes into depth about what you have covered here? I know you have a video about self help books, but what about us landlords??
Great video as usual
"Buy it rent it profit" is a good one!
A video on owning properties as an llc or your own name and if an llc is better than having insurance or doing both an llc and Insurance 👍
Graham - once you do a 1031 Exchange, do you start the depreciation on the new property again by 27.5yrs? or up to whatever years are left on the original property?
Pretty sure it starts over
The IRS gives you the option to split it into multiple depreciation schedules or combine them
Graham what is your opinion on rumored Venezuela making its own cryptocurrency tied to oil
Can you please make a video on how to get your real estate license in California. I keep getting conflicting answers. If you already have one link me please! Thanks
PremierSchools.com and follow their links :) Super easy!
how do you write off down payment for rental company?
I love real estate for the taxes!!!!
YESS!
On the 1031's once you sell a property do you have a certain amount of time to close on a new property or has to be in the same year?
D M short answer is yes. Usually it's 180 days after the sell of property. Plus some corky rules where you'll need a escrow agent to hold the gains of your proceeds until you can roll over the funds. Do a quick Google search on it. Good luck.
90 days to identify, 180 for purchase.
Talk to an attorney, many details.
Bout to be a millionaire thank you!!!!!
Just a check up. You millionaire yet?
@@alexshendel1984 LMFAO nah man I’m broke still....
Hi Graham from the past, I actually really miss quality vids like this if you see this comment.
Also, funny how BTC was on the rise and in a huge bubble when you made this video. And now it seems cheap compared to today.
Heck yeah this what I wanna hear
DC Redux Sameeee
No joke this was probably one of the most requested ones 😂
I would love your insight on vetting contractors.
Can anyone tell me how to depreciate a tiny home built by the business and used in the business for taxes-- length of time
Use a good tax consultant for that one, too many variables
Great info bro... do you have a video on what you need to be able to get a conventional loan with no problem.. or maybe you have already lol.
Graham love the videos, i've been watching them for a long time now. one question i have for you is, what kind of write-offs could i have being a land investor? i've just recently started investing in big tracts of land and flipping them. but i'm starting to get to the point where taxes are going to kill me this year if i don't do something, id love some advice.
Great Video!
I mean regardless, it remains a fact that interest is a loss of equity. Zero is better than nonzero, so if you can buy the home up front, then do it.
What does it mean when he says deducting it from your rental income? Do you get any of these back as tax refund ? I’m confused sorry
If you make 10k in rental income and have 10k in deductions then you pay zero taxes on that money if the deductions are more than the rental income then you can take the difference off your regular job income.
I’m forced to watch a Tai Lopez ad every. single. time.
Needless to say, I’m a millionaire now.
BAHAHA - Here in my garage.. We saw Tai the other day in LA on route to the Lakers game thanks to Graham.
Every add getting stoned
HeRe In My GaRaGe
Do you have to sell the property after you have fully depreciated it?
No. But you can sell it and roll that into a new rental and start the 27.5 years all over.
You know alot 😁🤘🏻🐾🐺💯 yea man!
Hey Graham, great video as always...I currently own one property that I live in and rent out one of the rooms. I'm thinking about doing a cash out refinance or some other way to take out the equity to buy a rental property. Do you think that's a good idea, or am I better off just getting a new loan for that new property ?
suttsd i currently own a duplex and rent the other and have considered this as one of the next steps for another investment property. Cash out refi is a creative strategy to leverage your current property to purchase another one. You will have to consider the pro and cons to doing a cash out refi. Keep in mind that is you do a cash out refi, the "borrowers money" is added to your current mortgage which extends out the maturity date and and increases your payment. But overall, if this increase can be offset by the increase of rental income. Good luck.
Did you do any forced appreciation with strategic renos? or did the area appreciate? It doesn't hurt to get the appraiser in and see what your options are. (could cost few hundred bucks for him but worth it)
Jeff Wybo hey Jeff, it's a bit of both..the area appreciated in value and I renovated the flooring throughout the house..wood floors upstairs and nice large ceramic tiles downstairs.
tou her thanks for your reply and congrats on owning a duplex. I have the 25 % down payment needed but I was just wondering if there are any additional benefits as to why a person would want to do a refinance instead of just getting a second mortgage