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Land Conservation Under Fire: How the New Omnibus Bill Impact Conservation Easements

What’s up folks? I’ve been getting a lot of questions on land conservation easements after the omnibus bill seem to break the conservation easements at a two oh and a half x multiple. Is it true? Are there loopholes? We’re gonna be going through both sides of the argument here so that I kind of stay in the middle and kind of say that I just gave you all the information that I tapped from my sources.

Ultimately, you gotta make. Station, but here we go.

Hi, my name is Lane Koka. I run the Who We Do Pipeline Club. If you guys would look on to join and get involved in our deals, go to sy paso castle.com/club. Um, if you haven’t heard what a land conservation easement is, You know, you’ve probably been living under a bus or some rock or something like that, and you’re probably not an a credit investor.

If you’re not an a credit investor, don’t listen to this video. It’s just, uh, not gonna help you out very much. What this is for high income earners that are making over three to $400,000 adjusted gross income every single. So a bunch of higher roller cokes. This is something that the IRS has on their kind of watch list.

Nothing that I’m talking about is going to be construed as tax legal advice, blah, blah, blah, blah, blah, blah. This is kind of the latest and greatest of what’s been happening. What I’ve been hearing from my insiders on this issue that is all kind of stemming from in December of 2022, this omnibus bill kind of came forth and changed a lot of the tax governments and how this stuff was gonna be viewed by the IRS from the 2016 latest.

But so we don’t lose anybody here. What is a land conservation easement? But basically it is sort of like a donation, right? Where donations, if you guys aren’t familiar, you donate something and you get a tax deduction on your taxes. Real simple. But in this case, what people are doing is they’re going into syndicated land conservation easement deals where a piece of land is syn.

And that piece of land is donated to be put on a conservation easement list where there will not be any type of development. Basically, the land goes to the ducks and the wolves, basically. Nobody else can build on it. It is kind of for the sake of the environment, and this is kind of a good thing in the long run if you’re kind of one of those green people.

But the main thing we’re talking about here is the tax side. What people are doing, or what they were doing is they’ve got a million dollar piece. But they’re getting it reevaluated for a higher and better use. Maybe that land can be redeveloped to put solar panel cells or put a big high rise casino on.

Of course, that wouldn’t be very practical, right? So there’s a level of how practical the ski land can be developed. Some cases it could be developed, you know, 20 x 30 x and that was what people were doing at one time. If you’re kind of following me, What they were doing was buying a piece of land, you know, for a million dollars and saying that it’s worth 20 million in their deduction.

Now, sort of along the years, certainly around 2016 to 2020, these kind of ratios came back and kind of got rained back to earth and the five x multiple put in a million dollar property and you get it reevaluated. 5 million. To get the deduction for the people in these deals still can provide a net positive for a lot of.

Take somebody making a million dollars a year, if they’re able to drive their income down to 50% of that to $500,000, they just shelter that $500,000 from that highest tax bracket, and especially if they live, you know, in state taxes too. And that could mean that their AGI goes from a million down to half a million, but more importantly, they save 50 cents on every dollar on that delta.

So that means that they just saved a quarter million dollars in taxes right there for putting in an investment of maybe a hundred thousand dollars. Again, that five x multiple a hundred thousand dollars infusion of. To get a $500,000 deduction in their adjusted gross income, and that equates set 50 cents on the dollar, a $250,000 gain back, so pretty dang good investment, right?

Something that kind of takes overnight in a way less a hundred thousand dollars and get two 50 back, right? That’s more than double your money. Now, what was been happening in years prior to 2023? Is that these ratios were being pulled back to a five x with the omnibus. There is a little bit more of a ruling system around the governments of this multiple, and that multiple now is two and a half x.

Now, using that same example, right, A guy, you know, using one of these syndicated land conservation easements, they’re adjusted gross. Is a million dollars. But instead of that, that five x multiple, now they’re only kept at two and a half X. So they’ve gotta spend, say, a hundred thousand dollars to get $250,000 of AGI differential.

So that means with a hundred thousand dollars, they can lower their just gross income from a million dollars. Down to $750,000. Still a big amount, but is it worth it? That delta of $250,000 may only mean a, you know, tax savings of $125,000 at 50 cents on the dollar there. Remember, they spent a hundred thousand dollars.

In this investment. So that means they’re only gonna get back $125,000 a delta of $25,000 to the positive. With that, it kind of negates the whole purpose of doing this whole thing unless they’re doing it for the benefit of the ducks and the air and the rivers and you know, all the Pocahontas environment type of stuff.

But is it worth it? Right. And this is kind of what the Omnibus Bill has kind of put. Now I’m gonna be going kind of through my notes here of what I’ve been kind of collecting from my sources that wish to remain anonymous, and that’s kind of the world that we live in this stuff, because a lot of this is not to be considered as tax or legal advice.

If you’re somebody who wants to do this type of stuff, well make sure you work with the right people. This is why people join our mastermind group, our inner circle, and join our club, right to learn about things just like this and deals and you know, where do you invest. Again, you guys can join that at simple passive cash flow.com/club.

A lot of this is based on your personal financial situation. This may not be for you, but certainly if you’re making over, you know, a few hundred, 400, $500,000 adjusted girls income. Probably is something you should learn more about. I’m gonna be going into a little bit more of these details from my notes.

So in years prior, you could kind of be in a deal and as long as you’re in the deal for one year, you could kind of make that election, or the syndication could make that election to make this donation. But now with the omnibus, now they’re saying you need to be in it for three years. Now I don’t know where this magical three year comes from, right?

A lot of these bills and government, you know, regulations don’t make any. The closest thing I can subject that where it comes from is maybe they’re trying to emulate long-term passive income, which, you know, my CPA tells me to hold onto an asset more than a couple years to get at better capital gains treatment. But it is what it is. Three years is what it says.

Another nuance is in years prior, you know, when people were going five x 24 x, 15 x under multipliers, there was some wiggle room. Now what they’re saying is if you go any higher than 2.5, you essentially brick your entire deal. You know, in years prior, you would’ve gone up to maybe 2.4, 2.5.

Anything higher than that would’ve just been, eh, yeah. You know, you’re not gonna be able to count that. But now they’re saying if you’re going higher, It’ll get all disallowed and thrown out Again, these are just, you know my notes, right? Not saying that what will happen if you get audited and what will really happen in the enforcement.

These are just kind of ideas that have been thrown around that I just want to kind of put into your guys’ head. For some of you folks who did conservation easements in years prior, maybe in 2022, and you’re probably freaking out, you’re probably like, oh my goodness, my conservation easement is gonna get thrown out because it’s higher than 2.5.

Here’s the deal from what I’m hearing, as long as your deal was first off, voted for, it was filed into the law in that jurisdiction and everything was kind of wrapped up in a bull before the omnibus came. Through in December of 2022. You should be fine in terms of being kind of grandfathered under the old regime.

Now, of course, you know, nobody wants to do this and I don’t really, I don’t condone any of this, right. But there’s a probably gonna be a lot of people out there who are doing this stuff, who made back date documents, forge documents to get it in before the conception of the omnibus bill in December, 2022.

I’m not, I’m not condoning any of that again, right? That’s not good. But I, again, I think I’m saying that because we talk a lot about entities, legal protection. When people wanna sue you for frivolous reasons, that’s the kind of garbage they’re going to do and pull on you. And this is why having, you know, if you’re a higher net worth individual, just having some LLCs probably isn’t gonna help you too much in terms of protection.

And this is why, you know, the wealthy people go through great extremes to totally eliminate liability or more protect themselves to a certain higher. Because there are a lot of unscrupulous people who do stuff like this, and it’s very easy kind of to fudge a date here and there. All somebody has to do is the CPA Turner who’s gonna be doing stuff like this.

Hey, gimme an extra X amount of dollars, it’s a consulting fee, and I’ll make this work for you. Scribble some dates back here that are completely illegal. I hear about it now. The omnibus bill is pretty rock solid in terms of saying, Hey, 2.5 x multiple, no more. There are some hopes here. Now the new commissioner is coming in and we don’t know how that person is going to be.

Are they going to audit this stuff? Well, we know that the old commissioner would audit everything from 2016 and beyond, so we know that for a fact. But what to what? Right. So one of the due diligence things when you do look at these types of deals was to go into a deal that had a healthy legal budget.

Why? Because if you had a healthy legal budget, maybe seven figures, to keep a battle going, at some point it may not be worth the effort for the iris to fight you, and it will just lead to a. These things are always settled. It just really never gets to the end, like law and Order where there’s a judge that says this or that, it typically gets settled just like any other litigation.

This one’s no different just with tax court. So if you’re able to fight it and be a pester, the theory is that you can, you may be able to get a better multiple or just ski through the system on escape. That is if they audited you, which if you work off years prior, you probably. But I think this is the biggest thing that people who are still doing this conservation easements are kind of looking towards as they’re kind of saving grace of, well, you know, at least I got the tax savings in the meantime.

And if I grew my money, if I double my money in the last two to three years anyway, or maybe even five or six years, by the time this work its way through the audit system as I would imagine something like this would just taking forever. You know, you’ve gotten that time benefit of money. Now, maybe the counterpoint to that is they, maybe they would backdate the penalties and.

And this and that. But if you’re able to grow your money, maybe you’re able to beat that taxes and, and, and penalties. Just another thought. Now we’ve kind of beat up this conservation easement. At this point, I would probably think at home that, yeah, I’m not gonna do this stuff. Now the other side of the coin is, here we go.

And again, no tax legal information on my part. I’m just telling you what people on the streets are talking about, that I kind of interact. So first off, we kind of mentioned it, right? Let’s just say the evaluation is two and a half or five x is what it used to be. There’s a certain amount that your evaluation can go down to that you still get a net positive benefit to.

That’s up to your personal situation, and I think that’s something that I can kind of help out in helping you determine if it makes sense for you or maybe there’s just some other mechanism, maybe real estate, professional status and passive activity. Losses are just a better way of going than this.

Little bit more risky. We’ve got the Tax Pal fund. I’ll get more into that at the end of this video as a more safer option, in my opinion, to get passive losses that are not recaptured. But you know, this is the counterpoint, right? This is kind of the devil’s advocate approach. One thing that I think people have to realize is why do you have this whole conservation easement thing in the first place?

Well, the purpose of it is to designate land that you cannot develop it for the sake of the environment. And whether you kind of believe. Yes or not, kind of do need it, and the government wants a certain degree of this right now. This is just a tug of war game. The omnibus bill has pushed things very in favor of just killing all these conservation easements.

The good ones, the ones that want to go through are not because of this is kind of killing the deal. The only people who are able to do this are big, big players not to doing it in the syndication space or so they. And these are kind of the loopholes. They’re kind of being evaluated by a lot of people right now.

If this year kind of passes by and maybe 2023 passes by and there’s not that much land being designated conservation easement, they may look to ease back on some of these regulations. Or what I kind of feel like is they put these types of loopholes in here. So as a means to allow for future land conservation easements, it’s actually to fulfill it Our.

But they kind of have the ability to award it specifically, or for people who have the legal team to fight it through. That loophole that I’m kind of getting at is right now there are regular conservation easements and these simple conservation easements. Regular conservation easements, the rights are kind of given up.

Land is not really donated, and those are more the traditional conservation easements that I think a lot of us are used to. You are able to, in the syndicated deals, you can use the benefits up to 50% of your adjusted gross income. If your adjusted gross income was $1 million a year, you could buy up all these conservation easement.

Maybe only at a two x two and a half X multiple. Nowadays, we don’t know yet, but you can drive it down to 50%. The other method is this fee simple, which may not be under the omnibus jurisdiction, and I’ll explain why later, but what they’re saying is you can possibly still use these fees, simple type of arrangements where the land is completely given up.

It’s not just the rights. Be simple, just donated and given away. The downside to this is instead of a 50% ability to lawyer h ei, you pony unlimited to 30%, which may be good enough. And what I would probably recommend most people to do is see your tax mitigation strategy, not as just a one trick pony with conservation easements, for example, but to use a conjunction of different mitigation.

And this kind of actually forces you to do that because at 30% maximize use of this, what’s happening is say, take that guy who has a million dollars adjusted gross Inca. 30% of it means that he’s only able to go from $1 million to $700,000 ei. And if you’ve seen our tax videos in the past, I always try to get people around $340,000 married, filed jointly, or maybe even around $200,000.

So obviously if this guy’s at $700,000 right now, there’s a lot of room of improvement here. Maybe they implement real estate professional status, or they have a lot of passive income and they use the passive losses, which again we’ll talk about here at the end of the video. But they use those passive losses that drop them from 700 back to 300 or 400 wherever they really want to follow that particular year using conservation easements.

But again, this be simple conserv. When I started to first hear this, I was like, I thought the omnibus bill was calling out all conservation, syndicated conservation easements as a whole, and to me this was a head scratcher. I personally don’t do the conservation easements, but I know a lot of my clients use them every single year.

Which is why it’s important to get around other people actually doing this type of stuff, because if you google this stuff on your own, you’re gonna find all the content marketers who are posing as CPAs that wanna put out a puff piece like this to make them seem really conservative. So most people will go to them, but there are a lot of aggressive folks out there that are investing in the right things that the IRS wants, that wants to mitigate their taxes as much as legally possible, who are looking for the.

So where’s this like little crevice that lawyers can kind of get in here and break up the whole omnibus thing? Well, it seems kind of strange and stupid. I kind of think it’s a little stupid, but the way it was written into omnibus, it doesn’t specifically call out the whole nuance between free, simple, and regular easements.

So again, where does this lead into? Well, it leads into, well, when the conservation easement deal is being audit. It will eventually go into this audit, and this is where we pay lawyers to do this stuff. And if anybody has done silly things for some legal reason, this is the reason why we have lawyers, and thus conservation easements may not be dead.

But in my opinion, at the very least, you can’t use that 50%. You had to go with the fee simple and do the 30% is what I’m. And maybe that two and a half multiple lies. Again, I don’t know, I just personally think it’s just better to use passive activity losses to lawyer your passive income completely and to dwindle your ordinary income amount over time.

To do this, you’re gonna need to get rid of your traditional investments and get into alternative investments that give you passive activity losses, and to do this a very old fashioned and clean way without having to use conservation. To me, conservation events are kind of like a wonder drug, whereas using passive activity losses offset passive income to cancel that out, or maybe to use a conjunction into real estate professional status to use your passive losses to lawyer AGI at that point.

That’s very basic stuff, and that’s kind of like good diet and exercise in a way, instead of just using the magic wonder. But however you guys wanna do it, and I think this is really gets into your own personal situation and your own risk tolerance you have with this type of stuff. I’ve been very clear, I’m not getting tax or legal advice, but I think this is where you need to have a group of community around you.

And that’s why we always, you know, have these events where people get to see each other face to face and talk about things like this instead of just Googling stuff amongst. Now I’ve mentioned, you know, how do you get these passive activity loss, which I feel is like, is a lot better way of mitigating tax.

Good old fashioned passive activity, losses, depreciation to knock out your passive income. If you’re somebody who has moved off of your W2 job, your business, your ordinary income, now all your income is passive income and therefore you could drive your income down to none. That’s kind of like how I live personally.

I pretty much just have passive income these days, and I’m able to use the massive amount of losses I get from real estate to knock it out, and therefore my adjusted gross income is pretty much nothing. No. Completely legal. So what we have is our taxal fund where what we’re offering investors in addition to a little bit of returns, is you are going to be putting in a dollar to get $1 of passive activity losses.

Now normally with passive activity losses, when the deal is exited or the asset is sold, you have to recapture those losses, which can be a bit of a drag. But we’ve talked about other strategies to mitigate it in other videos. But in this actual opportunity that we have, the passive activity losses will not be recaptured.

In fact, if the asset is ever sold me as the general partner will be, recapturing it on my side, shielding that recapture from you. So this is kind of a game changer. So way you use this is maybe your, you’ve got half a million dollars of passive income and you wanna bring that down to 300. So you need a couple hundred thousand dollars of passive activity losses.

You go look at your 85, 82 form, you, you don’t have it there. Or maybe you only have a hundred thousand. Well, you may need to buy some, and the tax power fund that we have will provide that. We have a lot more information for folks that are in our investor club, if you wanna check that out. Simple paso castle.com/club.

But I think it actually makes this kind of arrangement a lot. More desirable, especially when you combine the fact that bonus depreciation is not a hundred percent anymore as it was in 2022. In 2023, it’s down to 80% and in 2024, it’ll go down another 20% down to 60% until it con completely phases it out, and there’s nothing out there that gives you passive losses that you do not have to recapture.

This is the only thing I’ve heard. So it’s a tool and it may be a tool for your situation. What I would say is join the investor club, so paso casual.com/club. Check out the webinar we have, it’s about an hour and a half. It’s a little technical, but if you are into saving taxes, and you certainly should, if you make over half a million dollars a year, taxes is probably your number one expense.

And with conservation easements through this omnibus bill getting tougher and tougher. Sure. There may be some hope. As I alluded to in this video, it just seems like it’s getting harder and harder. Right? Just like infinite banking or credit investor banking. You know, the terms are just kind of getting worse over, slowly over the time horizon.

But the big thing is the best time they get it was yesterday before they make it even worse. Right? Same thing. But anyway, let’s end of the video folks. Thanks for listening. If you guys have any other questions or specific questions about this, put into the common box below, we’re gonna be releasing other videos that you guys ask us to do. Our email is team@schoolpassivecashflow.com. Share this with a friend. Thanks.

2023 Tax Action Plan For Passive Investors

What’s up folks? On this video, I’m gonna be going over the action plan for your 2023 taxes. I’ve been going over what really moves the needle and what really doesn’t work. I think the stuff that is out there in the mainstream, and this is how I’ve found to lore my adjusted gross income drastically over the.

Just a little bit. No, I’m not a cpa. I’m not a lawyer, but I also don’t have a day job like a lot of those guys, and this is a lot of the stuff that I’ve learned from working with other accredited investors through our business and just through my own travels as an accredited investor and an owner of 8,500 rental properties. Here we go.

The first thing I’d like to just identify, we’re not gonna be talking about the lay mold stuff like the 401ks, the Roth IRAs, even solo 401ks, IRAs, stuff like that. . These are all things that I put in the category of small ball type of tactics, small ball, and if you don’t know baseball, right?

This is all kind of stealing bases. Taking walks, little base hits what I wanna do because my time is short and your time is short, as a higher income earner is. Really focus on the big rocks as opposed to the things that don’t really move the needle. Yeah. At some point, these things, which you maybe should jot down or just check out on the YouTube channel, take a screenshot yourself for later, are things that I call optimizing.

the big rocks out of the way, but just in case you want to know what I’m talking about, and you’re somebody who likes to focus on the small stuff. I personally did at one time myself. Again, that’s putting me money into tax-deferred accounts such as IRAs, solo 401ks, or playing around even Roth IRA accounts.

All that stuff just shifts the taxes around. And if you’ve taken a look at some of my other stuff on my past Podcasts you guys can check that out at simplepassivecasual.com/QRP. I really explained the reasons why. There’s no reason that you should be in any of these kind of so supposedly tax shelter accounts, unless your net worth is, I would say four five plus million net worth.

or you wanna really hold non-real estate assets for some strange reason. The next kind of item here is, timing your game harvesting. If you’ve suffered a loss in crypto, which you probably did in the last couple of years, wouldn’t be a bad idea to sell the assets and buy it right back.

Crypto and taxes are its infancy. There’s not really this like 30 day wash rule that you have with stocks. I guess you can make lemon with lemonade or and get the deduction there. But that’s another. . The other one is, income shifting. , this is the whole paying your kids concept.

The whole idea is, your kids don’t make as much money and you’re in, they’re in a lower tax bracket as you. Therefore, if you throw them a bone, throw ’em like five, six grand. You can shelter some taxes that way at their lower tax rate as opposed to your higher tax break. And again, here’s where I’m talking about like small ball kind of things.

Whoop, they do. If you save 10% on your taxes on that six grand right? Yeah, you’re saving money and I don’t wanna phoo this, but again, these are small ball type of activities.

Even smaller than that, buying things that you may need for your business or your real estate rentals or helping you become a better investor. Maybe an iPhone, maybe a printer, or some iPads, maybe even a watch for all I know, right? The, it has to be reasonable, one part of your business. Running these things to your business is a great way to pay for things that. bought anyway and gotten a sort of discount on it because it was a deduction.

Now when you really add this stuff up, does it really move the needle? No, it doesn’t. And it is this same thing like. Buying a rental property next to you.

Know your relative’s house. Your family’s house. And I always tell people like, yeah, it makes sense, but like really how much money you’re really going to is the delta there? How much money would you go to see grandma’s house? You really spend there to be able to deduct and justify to, I would much rather be in a better location, better submarket, or even a better value idea like a syndication.

Who cares if it’s next to grandma’s? and where you can get the, write off some personal things right there. And this is a another example. Play the big game, the big picture. And this are these small ball activities. The last thing that I think a lot of business owners will do is like a S-Corp strategy where they’re playing these salary dividend split.

As W2 workers are 10 99, most of you guys are getting killed with pseudo faf fica South self-employment taxes which get added on top of your federal and state taxes. But when you have a scor, you’re able to carve off salary portion and then the dividend portion. Then dividend portion is the portion that doesn’t have to be subjected to those extra layer taxes.

Kind of a cool thing. , but again, these are small ball activities. Those extra taxes might mean an extra 10, 15%, but on how much, like a hundred grand. Yeah. I guess that might move the needle. Might move in if your, you’re moving $500,000 in a dividends, but at that point, you’re probably better spent, minding something else or what.

I’m gonna be going into. But I’m gonna be going into really the big things that I focus on my clients. The first one, especially for the high income earners, making over $340,000 is charitable donations.

Yeah, giving us stuff away at a Goodwill, but what I’m really talking about here is land conservation easements. Now, I’m not gonna be going into this particular one because it is a Pandora’s box of really explaining it. What I would recommend is go to my website and signing up at simplepassivecashflow.com/club or you’ll get a lot of free content to learn about these types of more advanced tax tools.

But what I also wanted to really go into was, A lot of this stuff is predicated on managing your adjusted gross income, not just deferring, right? Deferring was part of the last slide where it was small ball activities. What I’m talking about is just lowering your AGI.

Through a couple of ways, which I’m gonna get into here, but if you’re able to lower your adjusted gross income, now you’re able to pay lot less taxes. And the more you lower it, the better it gets. So if you’re making $400,000 and you’re in this 32% tax bracket and we lower it a 200, not only do you shelter that $200,000, don’t pay taxes on it, but it’s at a higher rate, right?

And that’s because our tax system is this progressive tax. What I recommend most of the clients do is really try and get to this red line here that I have shown, and this is a point where the break between the 24 to the 32% range, which is a big gap these days, I’m actually saying, maybe even try get into the $200,000.

A g I range at 22%. Of course, I’m talking for merit follow jointly. The, for the single folks. It’s a little bit different on the left side of this single filer status here. But, this is the concept of this is the big things as opposed to the small things that you should be looking at.

The question is, all right, cool. I get it. And this is the 1 0 1. In fact, this is more like the 2 0 1 tax class. How the heck do I do this right? Easier said than done. Here’s a little bit of review for some people who are brand new at this. . And you guys can check what I’m, I’ve got this diagramed in the right way.

On the left side here, I have ordinary income. Ordinary income, boo bad, ordinary income is like the W2 income or, and even 10 99, it gets hit with all these taxes, your ordinary tax and your FICA social security, about 15% on top of the zero to 37%. . We don’t like this stuff. Why? Because it’s high tax. What we want is on this other side of the fence, which is the passive income.

Passive income is cool, right? Passive, right? But other than the fact it’s from a tax standpoint, it’s actually defined as passive income, which can be offset with passive losses, passive activity, losses, suspended, passive activity, losses. We’re gonna use just the short word as pals, P A L S. Kind is cool, right?

Cuz they are, you’re a pal in this respect because you can use these passive activity losses, which you get from large syndication deals or rental properties. The fact that real estate degrades over time on paper, these are losses that you can take to offset your passive income. And when you are in larger syndication deals that do cost segregation and aggressively right off the.

which is a good thing. You’re often able to take, create a surplus of these losses and show a big red. One of the things that like really boggles my head and my clan’s head is in we try and show this to the banker or the mortgage lender and they look at like your tax profile, and you’re like, but you’re losing money.

Yeah, heck yeah, we’re losing money because all the depreciation and they just don’t get it. And just like how people don’t. Forget the 401ks. Forget the Roth IRAs. Forget the IRAs, right? That’s all deferring. What we’re trying to do is lower our a g I today doing these types of things, so getting back to using passive activity losses to lower our passive income.

Again, that’s zeroing that out. Now we cannot use passive activity losses to offset ordinary income right from our day job or your business because it’s separat. , there’s this red line of do not pass, sir. Now, the only way to get past. , there is a way to use their passive losses off offset your ordinary income.

And we’ve done this many times with clients, a high paid doctor making a million dollars, lowering their income to whatever they want, depending how much passive activity losses they have. They do this with a thing called real estate professional steps. We’ll call it reps for short. Now I’m not gonna get into too much of the detail.

Again, sign up for the club, simple passive cash.com/club. You get the eCourse and also check out the taxPage@simplepassivecash.com slash tax to learn more on how to qualify this and to review what we’re talking about. But in a nutshell, if you are able to qualify for real estate professional status now this kind of red line of demarcation goes away and it’s a bit of a free for.

A good free for all for you because now you’re able to use these losses that you get from the real estate to offset and lower your income. And this is where, a high paid person getting, million dollars of income a year, all ordinary income is able to use the losses from the real estate to lower that to whatever they want.

Now there’s a kind of a overlying portion of this that I think gets lost and this is where I come in, for those of people who, sign up for the club form and we get to know each other, I can help you walk through your personal situation accordingly. And then this is really gets into personal finance, whether rep status makes sense and where you are in terms of ordinary to passive income.

Most people I work with, they have a mostly ordinary income, right? They’re doing it the traditional way. They have traditional investments, stocks, bonds, mutual funds. They don’t really have too much alternative investments and pause there. I don’t know why they call it alternative investments when you know real estate is an alternative investment, but

I don’t know why you would call it alternative when it seems pretty traditional to me anyway, but anyway, that’s the terminology we’re using. It’s an alternative investment and real estate is. Something that per the iris code gives you a lot of losses. Again, pals. Our pals, we like ’em and at this point we’re able to get a lot of these losses to play these different games at our taxes.

But if you look okay, what do I do? Here’s what I’m saying, you gotta move away from the traditional investments because that stuff is portfolio income there and there’s no losses. You can’t do anything. And this is exactly what the government or society. , they want people to stay in that garbage so that they pay a lot of taxes.

And oh, by the way, the big brokerage fees are killing you in this process. , when I owned a rental property, I was making like two, three times better than what I was in the stock market. If you don’t believe me, check out an old video I did at simple passive cash flow.com/returns. I go through the numbers and show you exactly, the returns on an investment so you know how you’re making money through cash flow appreciation, the tenants are paying down your mortgage, and that these tax benefits all combined two to three times greater than what I was getting in that 401k nonsense.

But until you start to see this stuff for yourself, you don’t really get it. Hopefully you got from this video, you know this other alternative goal, which is forget about deferring with all the traditional stuff. Get into alternative investments so you can get these losses and over time your passive income will grow also, but also grow as a percentage in terms of.

In comparison to ordinary income because once that happens, now you don’t need that real estate professional status tag, right? If all your income was passive, which is personally where I’m at and a lot of my clients at who invest quite a bit, right? They have a lot of assets real estate assets that proves to a lot of passive income, and especially when they leave their day job, most of their income is passive income and they don’t need rep.

To offset that if they have the passive activity losses. So it becomes this kind of strange paradigm as you move through this financial journey the right way, in my opinion. Picking up alternative investments for the passive losses and then you start to get from, you start to get away from ordinary income and go to passive.

It almost is like you’re. Running paying a lot less taxes, a lot more like cleaner, a lot more efficient way of doing this. And that’s just it just makes so much sense once you understand this whole paradigm

And this is my bucket system that I talk a lot about people, the people ask should I do a Roth theory and Ira solo 401k? To me it doesn’t really make sense until you have today’s cashflow. Figure it out. And what is today’s cashflow bucket? What’s this whole bucket system?

I talk about a lot about my clients. The whole bucket system is. Imagine three buckets. The first bucket is get yours today, right? And I define this as 10 to 15, maybe in $50,000 of passive income a month. Typically that’s gonna be anywhere from three to 5 million net worth. Accumulate that much, and at least that much assets to produce that for you so that you’re living on good life.

That’s a great life. And at that point, you can’t really spend. At that point, that bucket fills up and it’s then the overflow spills into that next bucket, and here’s where you start to fund those self-directed IRA accounts, the solo 401ks, that type of stuff. But if you notice the way conventional financial dogma is structured, , it’s, they say to fill up this stuff first, and to me it’s completely backwards.

And the sad part that I see is that people never get to filling up their today cashflow bucket and they have to keep working. Maybe that’s how they created it so that we all keep working maybe, but, , you know that at that point, once that bucket gets filled, then you start to fill up nonprofits and make me make a mini foundation.

But most people don’t get there. And I think that would, at that point, you would probably have to come out to an event, learn the insider secrets at that point. But for now, just, in a quick YouTube video, just understand, create your cashflow bucket today outside of the tax.

Vehicles so you can get the losses. So you can use these losses to offset your taxes to date, and that’s how you’re gonna have more money to invest. Do other accredited investor banking. That’s another tactic that we have and that’s also in the e-course that you guys can get at simplepassivecash.com/club signup there for free.