In this episode of REAL ESTATE RADIO LIVE WITH JOE CUCCHIARA, we discuss different types of real estate investments – buy-and-hold real estate, real estate wholesaling, real estate flipping, real estate private lending, real estate tax liens & deeds – their respective tax treatment, and the importance of using the optimal tax entity to achieve the greatest tax savings for each. Cryptocurrency taxation and crypto tax strategy are also covered.
Tax entities for real estate investors are LLCs, partnership-LLCs, S-corporations, and self-directed retirement accounts. C-corporations are, generally, not recommended for real estate investments. Depending on the nature of your real estate investments, you’ll want to use the appropriate business entity – or combination of entities – that will give you the best tax results.
We also discuss the tax treatment of Bitcoin and cryptocurrency transactions. Investors in digital currencies are surprised to learn that trading virtual currencies results in taxable income even before they cash out their holdings to dollars. For example, if you trade Etherum for Ripple, even though you receive no “fiat” (industry jargon for government-issued money) you still must pay taxes to the IRS on any gains, as outlined in IRS Notice 2014-21. Self-directed retirement accounts, such as Checkbook IRAs and Checkbook 401Ks, can eliminate the tax compliance burden and tax liabilities of crypto investing.