Our guest today is Brett Swarts, Capital Gains Tax Deferral Experts, and speaker. In this episode, we dive deep into ways to avoid or defer taxes to maximize the benefit of real estate investing. We talk about the top 5 tax deferral strategies, focusing on the Deferred Sales Trust, and Brett shares how to live a successful and fulfilled life.
If you’re ready to leverage the tax benefits of real estate and defer your taxes, then this episode is for you!
Learn more about Brett and his journey at reiclarity.com!
“It’s my passion to help people defer tax. I’d never want someone to feel trapped by capital gains tax jail.”
Brett started his investment real estate career in 2006 as a multifamily real estate broker. After the 2008 financial crisis, he needed a side hustle. That’s when he heard about Deferred Sales Trust, and he knew he had to dive deeper into it and help people. Now, 10 years later, Brett is coaching others about tax strategies.
Brett shares his success and fulfillment formula:
- Find out what’s your gift, talent, or passion.
- Maximize the potential of this gift.
- Use your gift to serve others and impact other people’s lives.
“The Deferred Sales Trust is like Netflix. Why is it like Netflix? Well, first of all, it works for any kind of asset.“
Brett explains how the largest wealth transfer is happening now in history. It’s expected that $17-$20 trillion is going to pass from baby boomers to the next generation in the next 20 years. But they are burdened with a huge capital gains tax.
Brett’s top 5 tax deferral strategies for real estate investors:
- 1031 Exchange.
Unfortunately, it only works for investment properties and has many restrictions.
- Delaware statutory trust.
Essentially, it’s another form of 1031 Exchange, except you exchange your investment property into interest into a larger portfolio of a couple of properties. The challenge is you have to give up all control. It’s typically 7-10 years and you have no liquidity and diversification.
- Deferred Sales Trust.
This is Brett’s favorite because you can put your gains into a variety of types of assets. A Deferred Sales Trust is one you create while engaging a third-party company to act as trustee. You could sell your investment real estate to this trust in exchange for a deferred installment contract, or promissory note which you design and document in advance. You have to renew it every 10 years.
- Cost segregation.
It’s accelerated depreciation for investment properties. You can reduce their taxable income by having a cost segregation study or segregation analysis completed on the property.
- Seller carry-back.
Seller carry-back financing is when the seller of the property acts as a lender for a buyer on the seller’s property. The buyer typically pays you back in 3-5 years, but it’s not liquid or diversified.
Brett’s advice for ultra high net-worth individuals is to be aware of the state tax exemptions that are expiring in 2025. It’s 40% of the debt tax.
“The Deferred Sales Trust is a great way to raise capital.”
At the end of the episode, Brett picks an action step from the REI Clarity Framework that is the most valuable for him. This is the “Find the Money”.
According to Brett, the Deferred Sales Trust is a great way to unlock capital from sources that otherwise weren’t possible. There are other places that people have money, like cryptocurrency, primary homes, or businesses. If you can solve the problem of that illiquid asset to sell and defer the tax, it is the best way to raise large sums of money.
Mentioned in the show:
- Capital Gains Tax Solutions Podcast
- His LinkedIn
- The REI Clarity Framework
Learn how to grow your portfolio and reach incredible success the right way! Visit us here for everything you need to know: www.shineinsurance.com/reiclarity.
Special thanks to Brett Swarts for taking the time to share so many great insights with us
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Show produced by Eni Horvath