bwaldon4ParticipantOctober 16, 2018 at 6:57 amPost count: 75
My first year of land investing is coming to a close and I have no clue about taxes. I have $6,000 in cash deals and $40,000 in terms so far. No idea how to calculate profit/loss for land contracts and I have no idea about the tax advantages I can utilize for real estate.
Any book suggestions would be great!Michael AillonParticipantOctober 16, 2018 at 10:08 amPost count: 271Rod HallParticipantOctober 16, 2018 at 10:44 amPost count: 264
You need to do some accounting. Here is a very, very basic idea about how to record your transactions. Sales – costs of land = gross profit – expenses = profit before taxes. Cash deals are just Sales – cost of land. For terms apply a proportion which would be cost of land divided by sale. example; cost was 1000 and sold for 5000 and payments of 200 would be 1000/5000= .2. For every payment you get apply that proportion. example; payment was 200 X .2 = 40 would go to cost of land and the rest to sales. This is called and installment sale. I highly recommend Scott Todd’s Accounting for Land Investors. Worth it. You don’t have to know much accounting to apply the instruction. When you get the accounting done you are ready to do taxes. For taxes go to a pro. All they will need is your tax documents and a Profit/Loss Statement for your land business. Hope that helps.Chuck LidtkaParticipantOctober 16, 2018 at 11:46 amPost count: 121
I also vouch for Scott Todd’s Accounting for Land Investors course. I use it in tandem with QuickBooks Online. It’s really clear and concise and makes it easy for my CPA at tax time. Nice input Micheal and Rod!MilanParticipantOctober 16, 2018 at 12:37 pmPost count: 485
Great accountant is obviously an answer here. But it looks like you didn’t do much of a volume so it can be done very simply. In my first year I did about the same numbers.
I used taxact online software to do my taxes. It leads you through terms and cash deals. I didn’t operate as a bussiness, but I added all my expenses for acquiring the particular land to the cost, gas mileage included. It asks you (for expenses) to do it. It’s brain dead simple. Same with terms deals, it leads you to do it.
I paid short term capital gains on cash deals. If you hold more than year, it’s long term cap. gains (less tax). My terms income was taxed as a normal investment income. So basically I didn’t do my first year taxes in land bussiness as a dealer, but an investor. Was I righ? Was I wrong? Who knows. I’m not losing my sleep over it. Check your personal comfort level in this matter and proceed.MilanParticipantOctober 16, 2018 at 1:42 pmPost count: 485
Yes Scott Tods program seems to be fantastic. But there is one thing that is a turn off for me personally and with many that claim to be Profesionals.
His program is what you need most likely. But he warns you right in the beginning that you need to do your own research, and he’s not an accountant and you need to consult with your accountant and your situation is most likely different and so on and on. I understand he has to do it to cover his butt, but if everyone is saying that and still charging you handsomely for it, maybe spend money for real accountant that stands behind you and doesn’t give you the I’m not responsible spiel.
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