sam1000
Full Member
Cash: $ 21.05
Posts: 95
Joined: 28 Jul 2005
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| Tax shelter |
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I'm single and relatively high income, nearing six figures, in a 28% marginal tax rate.
Unfortunately I currently don't have any kind of tax shelter like a mortgage and right now I cannot afford to buy a home in the SoCal area (Orange county) because the median home price is $700,000 and most starter homes are going for $800K+.
I was wondering if it would be a good idea to purchase a home in some other part of the country as an investment?
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Fri Sep 16, 2005 3:32 pm |
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ushomeloans
Full Member
Cash: $ 10.55
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Location: Sacramento
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great idea! find one with a positive cashflow and include a management companies fees. there is a lot of great market out there still. Give me an e-mail.
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Tue Sep 20, 2005 7:54 pm |
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Rolo
Yo' Daddy
Cash: $ 309.70
Posts: 1551
Joined: 13 Mar 2005
Location: Colorado/Florida
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Don't forget the usurpury California tax rates and high cost of living turning six figures into four...hehe.
You might want to just move...that place is nuts. Californians are nuts. (I used to live in Riverside.)
Investment mortgages aren't deductible the same way a residence is.
"Expect me when you see me."
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Wed Sep 21, 2005 2:16 am |
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ushomeloans
Full Member
Cash: $ 10.55
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Location: Sacramento
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you can depreciate (sp?) your home value when it is an investment. Should be over 27.5 year, Example: 300,000 equals a tax write off of about 11K per year.
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Wed Sep 21, 2005 7:49 pm |
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town850
New Member
Cash: $ 1.60
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Joined: 18 Oct 2005
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| uhh |
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quote:
Okay if you say so. 
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Fri Nov 11, 2005 4:35 am |
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auggyf
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Joined: 24 Sep 2005
Location: San Francisco
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Hi Sam,
I think I'm in a similar situation as you: California resident, wage earner, and not significant deductions (besides the state income tax deduction on federal, and some charitable giving).
I feel like there's not much we can do as far as reducing income on our current earnings. To minimize taxes on your wage income:
- max out 401k if possible
- max out an IRA [Roth or Trad., but I would do Roth to vary from the 401k] if eligible
- take advantage of the 'flex' spending accounts for health, child care, or mass transit if it makes sense for you
Once all that tax is taken out, you might try to minimize taxes on your after-tax investments:
- hold tax-exempt money market or bond funds if it makes sense for your tax bracket, given the yield. I keep cash in Vanguard's CA tax exempt MM fund, which is free from state and federal income tax, and about 80% AMT free.
- hold bond funds in a tax-deferred account, such as a 401k. Alternatively, there are some federal government bonds which may have tax advantages. This assumes you feel totally comfortable keeping some taxable account money for retirement, and may depend on your situation/age/etc.
- consider investing in real estate which may have beneficial tax advantages. In the early-mid 80s, the benefit for high tax bracket individuals to invest in real estate was quite high, but since the upper tax brackets have gone down a lot since then, the benefit is diminished. Be very careful about making sure any tax deduction you are thinking of taking will also work for AMT (and see how likely it is for you to be in AMT in the future, which is somewhat uncertain given the politics). Also, you shouldn't make any investment decision solely on some tax benefit you might get, if you feel the price of the investment is too high or if you will be placing too much risk in a single investment.
As for me, I'm happy with renting and paying my regular share of taxes at the various levels. Yes, I know I can calculate how much I'm paying for living in California (9.3% income tax rate, rent/food/etc being xxx more than in some other place, etc), but I think it's more than offset by its advantages to me (friends, family, diversity of people and opinions, diversity of natural resources, job opportunities, etc).
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Fri Nov 11, 2005 5:00 pm |
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