Do you have too many PALs or “Passive Activity Losses” due to investments or real estate? The challenge with Passive Activity Losses is they must be used to offset Passive Income Generators or PIGs. The strategic use of PIGs and PALs is going to be crucial for many San Diegans under the new tax system.
In the past, many people had PALs they could not use in the current tax year due to the nature of their investments or their income. These were called “suspended PALs” and if you have suspended PALs you have too many PALs. You need some PIGs.
The new tax changes have created an opportunity for San Diegans to reconsider the nature of their investments. Many of the classic deductions are long gone, and it is time to have a serious conversation about how you should structure your investments going forward. The simplest way to reduce the amount of taxes owed is to reduce income. We are obviously not suggesting you look for a lesser job or agree to take less money for your work. The new tax law requires us to restructure your investment strategies and holdings so that we may reclassify as much of your income as possible to reduce the associated tax burden.
This is especially true for those who own their own home as well as a second property which generates rental income. Janathan Allen, an experienced San Diego tax attorney and managing partner of Allen Barron, has recently spoken to many organizations of local real estate agents, accountants and civic organizations about the nature of PIGs and PALs and how to restructure assets and investments in order to balance PIGs and PALs and ultimately how to reduce tax exposure under the new system. Our accountants and tax experts can evaluate your unique circumstances and provide a sound strategy to leverage your assets and investment strategy while reducing tax exposure.
Do you have too many PALs? Do you need some PIGs? We invite you to contact Allen Barron or call 866-631-3470 for a free consultation to learn more about how to structure your investments and assets to reduce tax exposure under the newly reformed system.