14 Mar Save Taxes in 2018 [SEP IRA]
No one wants to write a check for $20,000 to an uncle they don’t really like.
But that’s exactly what thousands of real estate professionals are doing every year when they write large checks to Uncle Sam to pay their taxes.
Don’t let it be you.
As the 2018 tax season approaches, here are some ways you can decrease your taxes:
B Minus E Equals T
No, this isn’t something you forgot from Algebra class.
B – E = T means Business – Expense = Taxes.
The bottom line is you’ll pay less in taxes when you have higher expenses.
You can decrease the amount you pay the IRS by the total amount of expenses your business accumulates. This can include expenses like your mileage to and from client showings, your monthly cell phone charges for business use, lunch meetings with potential clients, and more.
But how can I pay less in taxes for 2017 now that the year is over?
There are two business expenses you can still count toward 2017, even though we’re midway through January:
Open a SEP-IRA or make an IRA contribution.
You can fund your retirement and get a tax deduction at the same time by opening a SEP-IRA or by making an IRA contribution.
How does a SEP work?
If you are self-employed, you can decide to establish a SEP-IRA for yourself.
A SEP allows you to make larger contributions in good years and reduced contributions in down times.
Most financial institutions will offer you several investment options to choose from for your SEP.
Pros:
- Easy to set up and operate
- Low administrative costs
- Flexible annual contributions
Con:
- Must contribute equally to all eligible employees if you have a team.
Contribution Limits:
- 25% of the employee’s compensation, or
- $55,000 for 2018 ($54,000 for 2017)
Is the SEP-IRA the right plan for you?