No matter whether you view the economy as sluggish, brisk, or flat, several realities are evident, those being that corporate tax rates are at a record "low" of 39%, the highest individual tax rates are 39.6%, and long term capital gains rates are on average 28.6%, when taking into account the federal deductions of state taxes and the phase-out of itemized deductions. Moreover, in an uncertain election year, we are left to speculate on what the tax policies of two very different candidates would be, and whether our tax rates could float even higher.
Accordingly, tax planning and strategy in this environment can be volatile and speculative, requiring a sophisticated approach.
If you are a corporation with 5 or more shareholders, a taxpayer deriving income from passive sources, or you can fit into the definition of a "real estate professional", it would behoove you to consider a strategy of adding tax credits and depreciation to your tax planning tools.
For taxpayers that have a level of certainty that they will owe the federal government taxes, and better yet, can estimate the amount of those tax payments adding tax credits to your planning could save upwards of 25% on your federal tax bill.
Taxpayers that meet these criteria can invest into partnerships that own or manage renovated historic buildings or renewable energy installations, such as solar, geothermal, or biomass, thereby claiming federal tax credits, depreciation or losses, as well as cash-on-cash returns that together may reflect the aforementioned tax savings.
Fortunately, these are the services that we provide. Cherrytree has a pipeline of these deals that exceeds $50 million, all of which have been fully vetted to pass our strict investment criteria, and of which we are confident will be acceptable to taxpayers that meet our parameters.
The key is to choose projects wisely, and to invest with caution and solid due diligence, which requires detailed knowledge of these projects, the markets in which they operate, any risks inherent therein, and the fundamentals of the project budget itself, the underwriting of the future cash flow items, and the assessment of the developer's quality and ability to execute on its development plans. Furthermore, you need to be aware of how to structure and close these transactions.