Not Nuclear Science, But I Tell People It Is
We are living in a challenging time for real estate professionals. If you are not living in concern about what is happening, you may be in denial. The threats to the real estate professional are many such as rising inflation, increasing regulations and governmental control, missing qualified laborers, and the elevating threat of war and terrorism – just to name a few. So, what does this have to do with nuclear science?
During World War II – one of the toughest times in this country’s history – our scientists worked on a secret project called the Manhattan Project. Hollywood has told their story with a movie featuring Paul Newman called “Fat Man and Little Boy”. Along with my personal favorite, starring Sam Waterston called “Oppenheimer.” These films depict the hard work and dedication that the Manhattan Project entailed in detail. However, to boil the story down to its bare bones, scientists were organized to plan, implement, and then measure the results of building a nuclear weapon to end the war. While you may not be building a nuclear weapon, these scientists outline key steps for every real estate activity you may pursue.
Their plan was in writing and it declared specific steps including start dates and completion dates. The implementation was carefully engaged, and they documented each step in order to accurately measure their results. Finally, they consulted the best minds available at the time to ensure that they had the best information available for their project.
You might say real estate trade or business is not nuclear science. This is a correct observation. However, you would benefit from adopting this mindset around everything you do. No matter the size of your real estate activity, whether it is a trade or business. You should act accordingly. You should plan, implement, and measure your results. It matters. It really should matter to you.
You should surround yourself with the best advice you can have regarding your real estate activity. But you should not rely on their spoken words – good advice is in writing. Every real estate professional should have a detailed written tax plan – that explains how to legally reduce their taxes and save cash. These plans should document where the information is sourced including the tax law, revenue procedures, and any applicable tax court cases. It should explain what to do, when to do it, and how to do it. Most importantly, your tax plan should tell you why you're doing it.
Your first priority should be promptly implementing these strategies and reducing the amount of estimated or withholding taxes you pay now. Keeping your money in your pocket is always a good thing. Finally, you should measure your results. If you know how much cash saving you plan to achieve then you should prepare your taxes and measure your cash savings each year. Reflect on your taxes and look to see what may be missing from your tax strategy, the presence of which would make a difference next year.
Although real estate activity is not nuclear science, it is important to you. You should do everything you can to keep the money you worked hard to earn. At Stone CPA and Advisors, we offer a Discovery Session designed to look for mistakes and missed opportunities in your unique tax situation. We won’t be able to help you build a nuclear bomb, but we can help identify how much cash you can save with a detailed tax plan so call us at 970-668-0772.