Building Wealth Begins with Your Taxes
This time every year across the United States, early spring ushers in colorful wildflowers, longer evenings, and the collective anxiety of Americans preparing to file their taxes. Whether you bravely handle your own paperwork or you work with a CPA, you’re in good company if you procrastinate come tax time or think of your taxes as a necessary evil. But this year, Brett Tanner has recommendations that can help you change your mindset and turn tax time into an engine for growing your wealth.
A self-described “nerd” when it comes to wealth strategy, Brett has made it his mission to help other agents leverage their real estate business to create passive income and massive wealth for themselves and their families. As a top-selling real estate agent, Brett’s 110+-person team has been ranked No. 9 in the country by The Wall Street Journal, with more than $2 billion in real estate sold. A sought-after speaker, wealth coach, and leader of the newly created KW Wealth Community, Brett mentors entrepreneurs in creating consistent and seamless strategies for building wealth. As it turns out, tax planning is chief among them.
In a recent conversation with Jason Abrams, Brett revealed that despite tremendous cash flow early into his real estate career, he wasn’t building wealth because he didn’t have a model to follow or a proven plan in place. “I wanted to be worth a fortune,” he said, “but I had a $5 wealth plan.” That’s when Brett started studying the practices of the wealthy, including tax strategies that many CPAs often overlook.
Today, Brett shares his expertise in a live wealth-building workshop geared to help agents in building a strategic net worth wealth plan – to $50M! – including 15 proven strategies to reduce the No. 1 expense in business: taxes.
Whether you submitted your taxes early or filed an extension, this is the perfect time to start thinking about Brett’s top wealth-building strategies, beginning with an unconventional approach for qualifying the very best person to handle your tax returns.
Find a New CPA
Brett advocates taking control of your finances by shopping around for a new CPA. Finding someone who understands your business and has expertise in the areas that are unique to the real estate industry can provide you with tailored tax solutions directly suited to your needs. Brett recommends shopping your last three years of tax returns through different CPAs who have the expertise and creativity to identify potential deductions you or your prior CPA may have overlooked, and who can offer additional ways to save. Of note: The right CPA doesn’t need to be local. Cast a wide net beyond your state to find a CPA with the right expertise and ideas to help you maximize your deductions and save on your taxes.
Get to Know Cost Segregation
If you’re a real estate agent, your knowledge of the market gives you what Brett calls an “unfair advantage” to build wealth through real estate investing. If you’re a property owner or planning to invest in additional properties, Brett says it’s wise to learn more about “cost segregation.”
Cost segregation can help you save a significant amount of money on your taxes by accelerating the depreciation of assets, and it’s one of the most frequently missed opportunities for leveraging wealth. When you identify personal property assets that would otherwise be depreciated over 25+ years, and instead depreciate them over 5, 7, or 15 years, you can significantly reduce your tax liability. By taking larger deductions earlier, you can improve your cash flow, reinvest back into your real estate portfolio, and keep more money in your pocket.
Explore Section 199A
It’s a fact of life: The IRS tax code is complex and always changing. That’s why Brett recommends leaning into your new CPA to help you determine if your business qualifies for certain tax savings, like Section 199A. If you’re a real estate agent, the IRS categorizes your business as a specialized trade, which means you could deduct up to 20% of the income earned by your business if you meet certain W2 payroll requirements. Utilizing the 199A tax deduction can save you a significant amount of money, allowing you to reinvest more capital into your real estate business and ultimately boosting your bottom line. That means more cash on hand for investments that can increase your long-term profitability.
Make a Date with Your CPA
To stay on top of changes to the tax code and maximize available deductions, make a plan to meet with your (new) CPA multiple times throughout the year, including in November, when you still have time to evaluate and pivot your tax strategy. With a plan in place and a trusted partner who knows your business, you’ll feel educated and empowered to make the right decisions for building long-term wealth. And who knows? You might even start looking forward to tax time.
Explore KW Wealth to learn more about upcoming workshops and explore membership opportunities designed to help agents capitalize on their knowledge of real estate and build the future of their dreams.