This title may lead you to
believe Bob has gone a little nutsy. On
some days you may be right! However,
this title is totally accurate. You see
the PIG actually stands for Passive Income Generating investments. The
PAL really means Passive Activity Losses. It’s important to
note that Passive Income can only be offset by your passive losses. This is done on a dollar-for-dollar basis.
This is key to your tax
planning because your passive losses shelter your passive income and the net
result is that you produce tax-advantage income. Each year you may be carrying forward unused
losses. This is because Passive Losses
can only be used to shelter Passive Income;not your portfolio income nor your earned income.
How do you know if you
have Passive Activity Losses? Simply
check you tax returns and look for Form 8582.
I, along with your tax preparer or CPA, can help you locate this
document.
By using this approach,
you could be generating 5% to perhaps as high as 9% tax-advantaged
investments. There is no limit on the
amount of passive income and passive losses that can be offset annually.
Stay tuned as in the next
two posts I will share two approaches you can use AND give you a case
study. As in all other articles, call or
email me and I’d be happy to talk you through this, free with no obligations.