Accounting for Inflation

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Accounting for Inflation

I just want to go over the way that we account for inflation when it comes to calculating our Number

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Adrian, when you consider withdrawing 5% of your number to use this as ‘income’ to live your life’s purpose, is this a full ‘after tax’ 5% of your nest egg? In other words, on a number like 5 million, a full 250k withdrawn that can be spent over the course of that year?

If so, how are taxes calculated on invested money(on money making 301 strategies) and capital gains as it applies to what we are trying to achieve here? Is it merely based on whatever tax bracket you fall into depending on how much you earned in interest for that year(similar to working income)?

@ Scott – Great question for my LIVE show on this Thursday!

LoL, ok, I just hope my internet at home is back up. It’s been down all week 🙁

@ Scott – Phone a Friend? 🙂

YAY, internet is back up again! Now it shouldn’t be a problem to tune in on Thursday night!

@ Scott – Great 🙁 Now, I’ll have to think up an answer to your question …

I hope I can find an answer to this question! I am learning that there is a difference in how to do things in real estate transactions that make a difference in whether something is taxed at one’s normal rate and whether it qualifies for the capital gains tax. I’d never really thought about that before.

@ Diane – It is very difficult to plan for future taxes, so I don’t try … who knows (beside McCain/Obama) when you sell whether Capital Gains Taxes will be higher or lower than Income Taxes?

Instead, plan to hold for the long-term and ask your accountant to set up a structure that minimizes:

(a) your liability-related risks (e.g. your tenant sues you; or there is a fire and insurance fails to pay out), (b) current taxes on the property ingoings (and/or maximizes future benefits, if you are carrying a short-term ‘paper loss’), and
(c) the cost of setting up (a) and (b)

For your first residential rental property, this may simply mean ‘do nothing’ and leave it all in your name … all the way thru’ to setting up a complicated trust + (multiple) LLC structure.