Be vigilant! As we approach the end of the year, it definitely pays to be “present” in regards to your investments. For real estate lovers, there’s an effective college tax shelter that yields more deductions and provides a free residence for your college student.
Communicate your tax situation with your investment adviser, encouraging your adviser to take advantage of tax benefits like qualified dividends and long-term gain. Also, selling loss investments to offset gains (do not repurchase these within 30 days, which will prevent you from using the loss under the “wash sale rules”). If you sell a portion of investments bought at different times, report as sold those with the highest costs. Use tax and legal rules to multiply the value of your real estate investments.
Landlords. Beware of renting to family members. If you charge a family member below market rent, it is regarded as personal use and you cannot deduct rental expenses, according to the Tax Court. There are other ways to accomplish the same thing.
My advice: One way to get even more benefit is to buy a house in your child’s college town so you can hire your child to manage the other tenants. My advice is really inexpensive compared to the alternative.
Call me at (901) 507-4274 for advice and a possible tax forecast.