Monthly Archives: May 2015

The Biggest Wealth Drain? Income Taxes

These next couple of articles will show you the US Tax Code as you probably have never seen it before. The tax code is over 70,000 pages of boredom and confusion and is designed so badly that even all the authors of the tax code really don’t have much idea of how the system actually works. You can be sure that the code is designed to be difficult and keep you, as the tax payer, intimidated and paying the most money possible to your old Uncle Sam.

tax burden

Income taxes are the single biggest expense most Americans will ever have and yet very few people have a real clue how the system works. It is my belief that since you are going to pay taxes for your entire working lifetime and probably even some taxes after your death that you should have a handle on how they actually work and how to legally pay the absolute lowest amount of taxes allowable. To pay the lowest amount of taxes possible is your responsibility and not your tax preparer or CPA. Nobody will ever care more about your money than you do so think of this as your spring board to saving a fortune in income taxes over your lifetime. You will be amazed at how relatively simple it is to legally and dramatically reduce the amount of taxes you pay every year.

Let me say upfront that I am not a CPA or a tax attorney. I am just a tax payer like you that wanted to understand how I could get the tax system to work in my favor as much as possible. I have read countless books and listened to many live presentations from many experts on the subject of taxes. In these next couple articles I will be sharing information from a tax expert who has been teaching taxes all over the country to thousands of people for 20 years. He blew my mind when I saw him speak with all the great information he shared. We have become friends and had many business dealings together over several years. His name is Pat and he will be a huge asset for these taxation articles.


 

I am going to try to simplify some of the 70,000 pages of the tax code and supporting documents to help you capture more deductions and ultimately saving you $1,000’s of dollars on your taxes every year. A leading tax expert has graciously agreed to make one of his books available for FREE. Just go to www.wealthwithoutstocks.com to obtain the book. This book will show you little known secrets such as:

  • Why people over-pay their taxes
  • Two tax systems in America
  • #1 Tax Strategy in America
  • Profit Motive
  • Business Trips VS Vacations
  • Travel Rule Basics
  • Ski Trips
  • Cruises
  • Meals & Entertainment
  • Golf & Other Activities
  • Dutch Treat
  • Automobiles – Your KEY to a HUGE Deduction
  • Motor homes & Yachts
  • Medical Expenses
  • Tax Deductible Gifts
  • Insurance Premiums
  • Depreciation
  • Deducting your Spouse & Kids
  • Work Clothes
  • New Business Start-Up Deductions
  • Deductions for Employees W-2 Wage Earners

Obviously I can’t cover all of these topics in a couple of articles so I will just pick a few (5 to be exact) to give you an idea of what’s possible.

First we need to understand why People Over-Pay Their Taxes…

 Most people over-pay their taxes for 3 reasons:

1) Fear of the IRS and being Audited. As long as you are following the laws in the Internal Revenue Code there is no need to fear an audit. The IRS just wants to make sure you are doing things right and following the laws.

2) Not keeping good records therefore missing out on deductions – Would you be willing to spend just a few minutes a day, (about an hour a month) to put $6,000 of your hard earned money back into your pocket? That would be a great use of your time. You have the ability to make that a reality but you will need the “know how” along with the desire.

3) Not knowing the rules – What’s deductible and what’s not. The follow up articles and free book will open your eyes to available tax deductions most people don’t even know about. Remember, to consult with your tax professional to make sure you qualify and are documenting your deductions correctly.

TAXES- COMPLEXITY:

The U.S. Tax Code is very complex and confusing. No one, including any of the 100,000 or so IRS employees really understands it in its entirety.

TAXES – THE LARGEST SINGLE EXPENSE:

The average American pays about 30% of their gross income in taxes (Federal, State and Local), representing their single largest family expense. Taxes cost the average family more than housing and medical care combined.

Yet, few families ever realize the great expense that taxes cost them. While many people budget for food, clothing and other necessary expenses, they typically do nothing when it comes to planning to legally reduce their biggest expense: taxes!

We have all heard that middle class Americans pay the bulk of the taxes – there could be some truth to that.   Let me explain. You see, for the average American wage-earner, a W2 employee, there are about a dozen tax deductions they are entitled to however if you are doing something in your life with the intent to make a profit on a regular and consistent basis, you can be entitled to 100’s of tax deductions.

Tune in next week for our next article to find out how to dramatically and legally reduce your income taxes!

RE/MAX Event

I have been spreading the word all over the country speaking at seminars to people who are interested in getting ahead financially showing how to easily create and protect more wealth.  After being in real estate sales and investing for over 23 years I decided to take this message to the real estate community as well to help them grow and protect wealth.

John Jamieson with Pam Bellante and Joe Sabatini of RE/MAX of Southeastern Michigan

John Jamieson with Pam Bellante and Joe Sabatini of RE/MAX of Southeastern Michigan

If you are a real estate professional you know that one of the biggest problems you have is actually putting money away in a tax favored environment.  The reason most agents don’t come close to maximizing their savings efforts is that those tax favored environments lock up your money.  Since you are a commissioned salesperson how do you know that you might not need that money during a slow time?  You always need to have plenty of liquid cash in the bank to make sure your personal and business expenses are met.  Just because you had a good month or two does not mean you might not get slow in the next month or two.  It is a vicious cycle of thinking that is holding your financial growth way down.

The Perpetual Wealth System and Real Estate Agents Build Wealth were put together with that specific problem in mind.  We now have a way that you can put money away in a tax free environment and yet maintain control of the money and use it any way you see fit in the months and years to come.  So how much more money would you put away if you knew you could access it in 48 hours if you really needed it with no strings attached?   You can use the money for anything you wish with no taxes or penalty for accessing the funds.

We thank RE/MAX of Southeastern Michigan for hosting an event where I could speak to real estate professionals about their unique financial challenges and ways to help them build and grow their wealth so they are more confident as they are growing their business and prepared for when they retire.

See the RE/MAX of Southeastern Michigan Testimonial and from other events.

Free Webinar – Banking and Life Insurance

Please join us on Thursday, May 28th 2015 for an absolutely FREE Personal Banking and Life Insurance Webinar hosted by #1 Best Selling Author, John Jamieson

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Ask yourself this question; How much money would you have today if you had back every payment you had ever made on anything in your life? Every car, house, credit card, student, business loan, and any other debt in your life, you would have today. Not only would you have all those payments back but they would have been growing for years, tax-free, at a strong rate of return and you had access to the money any time for any reason without penalty.

You see, the average American family spends approximately 40% of their income on outgoing payments. We pay that money to banks and finance companies for the use of their money; in the form of principal and interest. Meanwhile we are told to invest 10% of our income into 401ks, IRAs, and other similar investment vehicles and hope the stock market goes up so maybe one day we can retire. Yet, as of December 2014 the US National Average Savings Rate was just 4.3%.

What if you were the bank and could pick up all those payments for yourself and your family? Would you be much wealthier than you are now? The answer for all of us is a big YES! If that interests you and would like to know more, join us on the webinar to get more details. You have the ability to start your own finance company and build wealth rapidly and safely.

Banking and Life Insurance Webinar is May 28,2015 at 8:00 pm EDT. This is free to join, please share this with others you know that would benefit from the great information being shared by John Jamieson. Don’t forget to register and put the date/time on your calendar!

Private Lending the Answer for You?

Many of us first think of getting a bank loan when we want to buy a house, a car, vacation home or a boat; invest in real estate; launch a business; and finance a college education. But a bank is just one source of funds for these items. No law says when you need a loan that you have go to a bank.
bag of money
They key to a traditional bank loan is partly collateral but even more so income and credit scoring. On the other hand, the private lending world is built on collateral. Many private lenders might make more money if the loan recipient defaults.
What is the Key to a Successful Loan? Collateral

Let’s consider a hypothetical real estate investor. He has found a fixer-upper with great potential. It’s on the market for $75,000. With $30,000 in repairs, it can fetch $150,000, he believes.

Banks don’t like to loan on fixer-uppers even if you personally qualify for the loan. If the bank makes the loan and secures it with a mortgage (or deed of trust, depending on the state), the borrower might pay 6 percent on the note and pay 1 discount point. The bank informs him that it makes no promises, and it will take 45 to 60 days to close — if it will close. This uncertainty puts the transaction at risk, so he needs another option.

He approaches another investor, who loans her own money for such transactions, so she is very concerned about the collateral. She will make the loan based on terms where she would be happy if the borrower defaulted.

How a Deal Might Be Spelled Out

The investor is buying the fixer-upper for $75,000 and is planning $30,000 on repairs, for a total into the property for $105,000 plus closing costs. He has $30,000 to make repairs but does not have the $75,000 to acquire this great deal. The private lender agrees to make the loan of $75,000 if the borrower will put his $30,000 into escrow and take three draws of $10,000 to make the repairs. If the investor flakes out after closing or defaults, the private lender has only loaned $75,000 and has the $30,000 cash needed to repair the home in escrow that she can use.

All of these details are spelled out in a note and mortgage agreement drawn up by a good real estate attorney. What are the chances of the borrower not paying the private lender with $30,000 of cash in the deal plus the chance at another $30,000 net profit? The private lender will almost always be paid back per the terms of the agreement.

The terms of this private loan are negotiable but must not conflict with state usury laws. Maybe the private lender charges 3 discount points and a 10 percent note rate. That’s more expensive money than the bank, but the deal gets done in just a few weeks as opposed to maybe never with the bank. Sometimes the most important factor in making a good deal is not the cost of the money but the access to the money.

Making private loans as the lender or obtaining loans as the borrower might be a great fit for your personal financial goals. But either end of the deal will require more education and a team of professionals to make sure these are safe, profitable deals for all involved.

To Rent or to Own… That is the Question

Rent_or_Own

In 2007 and 2008, property values nationwide dropped dramatically in sympathy with the banking crisis, mortgage crisis and the stock market crash. Never before had values of residential real estate fallen so far, so fast and in so many places. It seemed that one of the staples of American wealth was a lousy place to invest money.

During those brutal times, many investment advisers started suggesting renting a home was the way to wealth. Their theory was that if you invest your down payment money in equities, you would have piles of money in 20 years. Rubbish! These recommendations always come from people who broker your money into equities and are backed up by dubious math.

Some Simple Arithmetic

Let’s look at buying a $175,000 home — and renting one of comparable value. In most areas of the country, due to the down market (although values have had a nice rebound over the last seven years) and very low interest rates, your payment to own will be less than the rent for a comparable home.

If you bought a $175,000 home and put $8,750 down and negotiated the seller to pay most of your closing costs, you could get into this home for around $10,000 total investment. Your 30-year mortgage for $166,250, at 5 percent, would produce an $892 monthly payment. Taxes of $200 and insurance for $70 gives you subtotal payment of $1,162. Because you put less than 20 percent down, you will also pay mortgage insurance until you hit that 20 percent equity. This will give you a total payment of about $1,232.

Rental markets vary (look at www.rentometer.com), but in most areas of the country a $175,000 home will rent for $1,300 to $1,600. Let’s use $1,400 — or annual payments of $16,800 — with nothing to show for it but receipts. If you lease homes for 20 years and rents increase even a little, you will pay approximately $360,000 in rent and have nothing but rent receipts.

Consider These Variations

If you bought the home with the numbers described above, what might your situation look like? In 20 years you will have paid $295,680. You will owe $88,000 on your mortgage balance. But what if you had used the $1,400 that a home like that would rent for and paid down your mortgage balance by an extra $168 per month? In 20 years, your mortgage balance is only $18,500 — so your payments have created equity and wealth.

What about the increase in value of the home? I never try to predict the ups and downs of any market, but even with a modest appreciation rate of 4 percent, your $175,000 home is valued 20 years later at $389,000. The house is almost paid off (if you used that $1,400 rental payment) and is worth $389,000.

But what if the value increases less, stays the same or falls? Who cares? You had to pay to live somewhere. Whatever the value is, you own it free and clear and have only the taxes and insurance in your later years. Almost all successful retirees own their properties free and clear. If you are always renting, you create wealth for the landlord.

But Wait, There’s More

I didn’t forget the theory about putting your down payment money into equities. If that $10,000 grows at a strong 8 percent, it would grow to just under $50,000 in those same 20 years. This is a far cry from financial stability — or the equity in your home that you can access in several ways.

Even if you factor in the additional expenses of owning a home — say $50,000 for repairs and updates — most of that will be offset by your tax write-offs of your interest and property taxes.

According to the Federal Reserve, the average net worth of a homeowner is over $174,000 and average net worth of a tenant is $5,100. This is where financial theory collides with the realities of human nature. Home ownership is a natural forced savings and possible investment account that requires nothing but you to make your payment and enjoy your home. You also have the ability to alter the home as you see fit and are in charge of how long you stay. A home is where you will create memories for you and your family. The investment part is a bonus.