Why should you add passive income to your active income

If you are a full time W-2 employed person what you make is active income and is taxed accordingly. If you are also an investor in real estate like in Oklahoma City it is passive income since that is not your primary function, so how do we compare active to passive income? First let me say I am not a CPA or a tax lawyer, but I am an investor and I sell Oklahoma City real estate investments. First, on residential real estate you can depreciate the improvements but not the land over 27.5 years. For example, if the improvements were worth $150,000 then you can write off about $454 a month, so if you have positive cash flow of $450 a month then you are in a position to offset your taxes. Add to that improvements and repairs as additional write offs and your income can be 100% tax deferred. This is where the fun part is when you sell the property. The IRS allows you to do a 1031 tax deferred exchange which means you pay no taxes on sale for a recapture tax on depreciation, and no capital gains tax if you reinvest all you money. You can do this for all you life and can use you profits to buy multiple rental properties. So look at it this way, if the income you receive from rental property is "net income" to you then think about how much active income you would have to make after taxes to equal you passive income. That can very easily double you effective money coming in. Remember, no investment of your money is without risk, but investing in real estate like in Oklahoma City and elsewhere is going to be on the lower side of risk. It is easier to assess the value, positive cash flow is a good size mostly dividend, it is tangible bricks and mortar that you own alone, and it can be tax deferred for life. Tom learn more about how to invest in Oklahoma City homes for sale and build up your passive income for retirement, you children's college education, or just extra income for you, please contact me at joe@joepryor.com.