So I’m talkin’ with a guy while taking my afternoon break. We’re enjoying the warm weather here in San Diego, and the conversation veers suddenly to his family budget. We’d been gabbing about how food prices seem so high these days. “I love asparagus” he said, “but I’ll be danged if I’m gonna pay almost $4 a pound!” I asked him if he owned any investment real estate, and it turned out he owned a fourplex he’d bought back in 2001.
Now he’s really got me interested. 
Since he already told me he was married with three kids still at home, I asked him what he did for a living. He didn’t want me to repeat it here, as he didn’t want local folks to maybe recognize him. He did tell me though, that his gross pay was just under $80,000 a year. His wife was a stay-at-home mom.
My questions had made him curious as to what I did. I fessed up, and he said to go ahead and keep askin’. To make a long story short, the exemptions he’d been takin’ at work were only for him and his family. I told him he should have a quick conversation with his CPA to ascertain how many more exemptions would be prudent for him to claim.
See, his annual depreciation is roughly $15,000 annually. By increasing his exemptions he’ll simply be changing when and how he’s reaping the tax savings provided by the depreciation. Instead of allowing Uncle Sam to use his money interest free all year, he’s getting it every paycheck by way of increased ‘take home pay’.
This will have a huge impact on his family’s monthly budget, as it’ll translate into about $800-1,200 more dead presidents every month — without the attending extra income tax. Remember, that income is already sheltered by the depreciation. Next April when he files his return, his tax refund will be less — a tradeoff he was more than happy to make.
Let’s explore what tradeoffs you’d be happy to make when it comes to your retirement. You’ll reach me at 619 889-7100. Have a good one.
Related posts:
- Real Estate Investors: A Simple Way To Increase Your Capital Growth
- Everything’s Free & Clear — Rentals Included — Yet Still Taking Home 25-35% of What’s Easily Attainable
- Old School Style Real Estate Strategies — All They Do Is Work
- An Example Of Grandpa Economics’ Principles At Work
- What Does The Percentage Of Home Ownership Have To Do With RE Investing?
About BawldGuy
YES! The advanced version of this is to pay most of your taxes at the end of the year through witholding. Before you try this, make sure you understand what the term “safe harbor” means. If you google ‘safe harbor tax’ then you can read up about it.
Jeff — Baby steps first.
Safe harbor is huge in what we do. Maybe I’ll post on it.
Don’t be a stranger.