Video instructions and help with filling out and completing Why Form 4797 Dont

Instructions and Help about Why Form 4797 Dont

Hey everyone welcome back to the Jack Chapel show and today I'm going to be talking about how to pay no taxes through real estate and I mean zero and if you build up a big enough portfolio you can be making hundreds of thousands of dollars and not pay any tax on it and I promise is an actual thing that happens so I was you know listening to Robert Kiyosaki the guy who owns you know the billion dollars in real estate or whatever and you know I was surprised when he said I don't pay I might make millions of dollars per year but I don't pay tax ever even if I sell a property I don't pay taxes no I just want to say this before I go into all the real reasons why you don't pay tax he can sell a property if if you sell a property and then buy a property right away then you don't actually don't have to pay tax on all over the land transfer fee or whatever it's goes under this wheel weird rule in the United States I don't know what it is in Canada but anyways so I'm gonna write out an example here and I am going to go through why you will have a net tax deduction of thousands of dollars after everything and it you know we're just gonna go that this year so let's just say you buy a property for 300 or you get a mortgage for 350 K three hundred fifty thousand dollars on the property okay that's the mortgage sorry I have this written out here on my phone so I can just keep going here so we're gonna say that based on whatever a two point something percent interest rate I think two or three percent or something like that I figure out what I used for my example here the interest on that loan is eight point five K per year so this is common you get to you get to write off the interest on your mortgage payment every single year so automatically on a 350 thousand dollar mortgage mortgage you get to write off eight-and-a-half K a year so you get from your income if you make 50 grand eight and a half is just knocked right off okay so they assume that you make whatever that number is forty one thousand five hundred pretty okay so moving along here the next thing here which is the most important thing when building a real estate portfolio is there is a 4% in Canada it's called a CCA a capital cost what does the capital cost allowance or appreciate capital cost allowance I think it's what it's called and in the United States it's called depreciation I know a lot of you are saying like yeah I know what depreciation is that the valley of the properties goes down right but in real estate what happens is the government you know says the value of the property goes down but the price of the property actually goes up and appreciates you know I'll explain you know I'll just explain why they think that so so you're allowed a 4% write-off for the value of whatever you purchased it for so for this example we're gonna say that the it's only for the building by the way it's not for the land but the building is usually the most valuable part of the property anyway so buy a lot so for this depreciation would account for $14,000 a year in write-offs and tax deductibles so why would the government allow this so just by these two things that's twenty two thousand five hundred dollars in tax write-offs for this person purchasing a three hundred fifty thousand dollar property so why then keep in mind this is for an investment property so the government has this thing called recapture so for example if you were to do this three hundred fifty thousand dollar mortgage whatever you purchased it for you take a four percent depreciation per year and you end up writing off over the course of three years forty two thousand dollars so of this three hundred fifty thousand dollars you're saying that the property went down in value to three hundred eight thousand dollars what they say is that when you sell it you have to pay back with Nora of with a normal tax amount the forty two thousand dollars so that ends up being taxed but anything they sell above three hundred fifty thousand dollars so if you sell the place for four hundred thousand dollars the additional fifty grand Gault's is taxed in the normal capital gains way so it's half the price of what it normally is half the anyways so I'm gonna keep going here so you have $22,000 in write-offs just from this one property from $350,000 we're going to keep going here the rental income from this property it just said you know average we're just gonna say 28 grand okay if it's an investment property you can get 28 grand for a 350 grand property it's possible alright so yeah your rental income is $28,000 a year your mortgage total everything is 19,000 this is including the principal in the interest that's your total payment per year and you're gonna have two thousand dollars in expenses repairing the place all that kind of stuff so after everything your net income on this property would be about sorry it's $20,000 $7,000 a year okay that's your net income on this property remember our tax breaks so your net income is seven grand but you have tax breaks of what $24,000 so tax equals $24,000 so think about that for a second this one property if you do everything correctly is essentially a 17 grand tax break now actually I shouldn't say that it's completely like that because you can't