Land trusts are incredibly useful for real estate investors. They allow clever investors to remain anonymous, prevent lawsuits, and manage investments. They offer many more financial and legal perks.
With all of those sexy benefits, it's no wonder real estate investors want to know more about them. So this article is here to guide you through the decidedly unsexy part of land trusts: taxes.
Nobody likes to dole out any more cash to Uncle Sam than necessary. But we're here to show you the tax requirements and benefits of using a land trust. It as painless as possible. Here are quick and dirty answers to the four most frequently asked questions we get about land trusts and taxes.
In short: definitely. Failure to file taxes on anything that produces income is considered tax evasion, which you may know as the felony that finally landed Al Capone behind bars. While you're probably not running an illegal bootlegging operation, tax evasion on its own is a very serious matter. The last thing a real estate investor, or any business owner, needs is to get into a fight with Uncle Sam.
Land trusts absolutely come with certain tax perks. Some of the most popular are the following:
How much your land trust taxes will actually cost you is going to depend on the state the trust is formed in. If the trust is for an investment property outside of your home state, your state of residence may also have additional tax requirements. To be sure you're filing appropriately, make sure you have a good CPA.
Regardless of your level of experience, it's a good idea to have a real estate dream team that includes a CPA and qualified, detail-oriented attorney. That said, you can get an idea of your state's requirements with a cursory internet search.
Because you'll receive pass-through treatment, you simply will report your taxes on your personal return. For detailed instructions, consult with one of the dream team members mentioned above. If you still haven't formed your dream team, that's okay: we can help.
Royal Legal Solutions has attorneys, tax professionals, and CPA partners that can help you navigate these tedious waters. As investors ourselves, we love helping our clients get the most out of both their land trusts and their tax preparations. To learn more about how to best take advantage of your land trust for tax purposes, take our Tax Discovery Quiz.
Find out about the tax savings strategies that you can implement as a real estate investor or entrepreneur by taking our Tax Discovery quiz. We'll use this information to prepare to have a productive conversation. At the end of the quiz, you'll have an opportunity to schedule your consultation. TAKE THE TAX DISCOVERY QUIZ
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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