Today’s blog is all about our favorite Springtime tradition: digging through dusty folders (digital or analog) to find old receipts and guessing how much we owe in taxes. As one of the best home loan lenders in the area, I’ve dug through my share of tax returns and have seen the gamut of organization and reporting abilities. Here is a (hopefully) informative set of tips to help you think about your partner Uncle Sam.

1) Better Late Or Never

When you see the tax code as an instruction manual from Uncle Sam, you can begin to take advantage of how the system has been designed. The government wants to incentivize investing in businesses and real estate, so they give lots of breaks to those who do. When you work with the system, you pay less in taxes (or pay them later, which is the same thing).

2) Tap That Asset

This is a great cycle that can be the backbone of building a life-changing portfolio, but I want to zoom in on point #4.

Regular income is taxed (up to 37% at the federal level) and rental income is taxed similarly. What isn't taxed is the equity that you can tap into over and over again throughout a lifetime of ownership, especially as the property appreciates.

Refinancing or using a line of credit to buy other properties (or appreciating assets) can supercharge your portfolio building in a compounding way. My parents refinanced the home I grew up in several times and used the money to buy other houses, then refinanced those properties years later to buy more properties, all without paying tax. As long as you can take a hit to the cash flow of a property, it's a playbook you can run again and again without taking a ~30% haircut to Uncle Sam each time.

3) You Can’t Spell ‘Cosplay’ Without ‘CPA’

As an investor, a good CPA who invests themselves and works with investors is absolutely critical.

It is so easy to mired in the details of a particular deal, running ARV, LTV, and IRR. But when taking a long-term view of wealth creation and portfolio management, your CPA should be guiding your steps in a way that can avoid large bills come April. A CPA who understands real estate investing can see around corners, help you structure deals, and arrange the rest of your finances to work in harmony to reduce your tax liability each year.

Cosplaying as a tax professional can be very costly. Pay for good help, or pay for it later.