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How Opportunity Zones Can Wipe Clean Your Capital Gains

  This is the fifth video in the series. In the first four, we identified real estate investment opportunities, we discussed the challenge of capital gains and depreciation, we talked about using 1031 exchanges to defer that depreciation. But is there a way to just eliminate those capital gains? A qualified opportunity zone. What is it? It's essentially a designated geographic area, usually a low-income community, and it's designated within the rules of the Tax Cuts and Jobs Act of 2017. It is designed to incentivize investment in areas that are underserved financially, that need economic development. There's a whole debate as to how effective this has been, but that's not the purpose of this video. If you invest a high capital gain rollover into a qualified opportunity zone and you hold it for five years, 10% of those capital gains that you invested on top of the gains in…
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How To Leverage 1031 Exchanges For Tax Savings

  In the last three videos we've talked about real estate investing, capital gains, depreciation, recapture, and how to defer those using 1031 exchanges. As we know, 1031 exchanges defer capital gains on real estate transactions, but sometimes they're tricky. Today we're going to talk about some advanced strategies to maximize the benefit of 1031 exchange. So, you want to do a 1031 exchange. You’ve got the property. You've sold it. But for whatever reason, maybe it's a very rich real estate market, maybe there's just a lack of inventory, you can't identify in 45 days, or you can't close in 180. That may be a financing issue. What are you going to do? Well, all is not lost. There's actually a strategy called a Delaware Statutory Trust, a DST. It's a very complex trust, but it's okay, you're not inventing it. There are alt investors, there are private investors,…
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Just How Fragile Is The Banking System?

  With all the news of bank failures, just how fragile is the banking system today and what, if anything, can you do about it? If you're one of my clients, you already know that interest rates, when they rise, cause bond values to fall. Long bonds fall a lot. This is why for the last two to three years, we have been putting our clients in short-term bonds to protect them from the ravages of the bond market in a rising interest rate environment. Somehow, to my great fascination and to the consternation of regulators, the Silicon Valley Bank, Signature Bank, First Republic Bank*, and probably more to come broke that most fundamental rule, and when loaded up with cash post-COVID because everybody got disbursements, they got bailout money, they got PPA money, they wanted to put that money somewhere and they decided that treasuries weren't yielding enough, "We'll…
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Deferral of Gains on Real Estate Investments

  I’ve previously talked about investment real estate as an investment asset class. Of course, the challenge already identified is that when you sell investment real estate, you now must recapture depreciation and you'll be also taxed on capital gains. Are there strategies to defer gains or maybe even eliminate them on the sale of your property? The short answer is yes. There are three primary strategies available. One is the 1031 exchange, the second is a qualified opportunity zone, and the third is the installment sale. Now, in the last video we talked about the simplest one - your personal residence. If you own a personal residence for more than a certain amount of time and lived in it two out of five years, the sale of that property, if you're an individual, you can roll over $250,000 of capital gain, if you're married, $500,000 of capital gain into…
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Taxation of Real Estate Investments

  If you're a real estate investor, of course one of the big bugaboos is real estate taxation - how do you maximize the tax benefit of your real estate investment? To an extent, almost all of us are real estate investors, even if we're not thinking about it. As a homeowner you're enjoying a mortgage interest deduction, probably, and a property tax deduction. There are limits, a $10,000 cap here, a million dollar mortgage there. But in essence, even a homeowner is getting some kind of tax break. And should you sell that house between $250,000 and $500,000 in capital gain can get rolled into a future house. All good reasons if you're staying put, to consider real estate for your residence because it's also an equity building tool. However real estate investors, in addition to these breaks, can depreciate the property and enjoy other much more sophisticated benefits.…
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Real Estate As An Asset Class

Real estate as an investment asset class. What are the merits, what are the pitfalls and how do you avoid them? From the beginning of the century through the end of 2021, the FTSE NAREIT All Equity REITs Index gained 9.6% versus 7.7% for the S&P 500. It has been one of the best investment asset classes out there. Now, that's not been as true since interest rates started climbing, but when this interest rate cycle is over, we can expect improved performance from real estate. Now that's important. What I gave you were statistics for the entire real estate environment, and it does vary by sector. Office properties may not be the best properties to be invested in in this post-covid environment. For those of you who are interested in investing in real estate, you have a choice between physical real estate and what are called REITs, real estate…
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With Interest Rates Climbing, What To Do With Cash Right Now?

  Interest rates are finally reverting to some sense of normalcy. For savers that's great news. Now the question is, what's the best harbor for your cash today? As you're probably aware, everyone's talking about higher interest rates. After years and years of sub 1% returns all of a sudden we see 3.3, 3.5, 4. But with interest rate hikes not yet over, let's talk about what the options are out there and keep in mind that all choices come with trade-offs. There's no such thing as a free lunch when it comes to this treacherous field. So when we're trying to figure out what to do with cash, we have a lot of interesting options. In summary, there are banks, money market, mutual funds, ultra short term bonds and CDs. So let's go over to the board and take a look at how these options pan out. Let's talk…
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Making This Tax Season Less Painful

  Well, now that the holiday season's over, we're already looking at filing tax returns once again. We're going to talk today about how do we minimize the pain and mitigate the suffering that goes along with filing your taxes each year. At Avion Wealth, our focus is mitigating your taxes and maximizing your cash flow, and part of that is helping the client with their taxes. In fact, throughout the year, we're looking at tax strategies. One of the issues that we get at this time of year is that the CPAs want documents as early as possible, but you don't have them. And if you send a document every time you get it, the CPAs are likely going to charge you every single time they get a communication from you, because they have to open the file and file that document. It's very inefficient for them. It can…
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Secure Act 2.0: Now You Can Rollover a 529 to Roth IRA

  So, in the last couple of videos we've talked about the Secure Act 2.0. Today, we're going to talk about an intergenerational gift from Washington DC that's buried into this act and it's the 529 to Roth sleight of hand. Effective 2024, these new rules, which are slightly complicated, suggest that if you have kiddos and you don't have a 529, get one and put a dollar in and you'll see why. Because now $35,000 of unused funds in a 529 can now be rolled over into a Roth IRA for the beneficiary. In the past, the concern has been what do we do if we overfund? Will there be a withdrawal penalty? That concern has now flipped to, "Oh, wouldn't it be nice to have too much money, up to $35,000, and be able to roll it into a Roth IRA for the kid?" Now, there's a lot…
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Secure Act 2.0 Extends IRA Required Minimum Distributions

  Secure Act 2.0. This is the second in the series of videos talking about all the goodies in the latest Secure Act with regards to IRAs and other retirement accounts. The big conversation for today is how are the new required minimum distributions going to affect you and your family? The good news is, we already had the required minimum distribution age bump up from 70 and a half to 72. Now, in 2023, if you haven't already started required distributions, that age increases to 73. If you've already started distributions, you have to follow the current schedule that you're on, but 73 is nice. The good news is, those who are under 63 will be able to use the 2033 rule, where you don't even start required minimum distributions until you're 75 years old. So those who are just barely reaching Social Security age or younger, you're looking…
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