At SDC Energy we are always looking ahead. We reached out to one of our closest partner, Jason Vanclef, Founder of Vanclef Financial Group, Inc. to help gather actionable insights to help you in your tax planning.
Vanclef Financial specializes in traditional and alternative investment opportunities that are fully vetted through its own due diligence process. Jason’s expert advice is summarized into these top tax tips:
Tip #1: The Best Tax Planning is Forward Looking
Now is the time to plan for ways to lower your taxes for 2017. According to Jason, the first problem wealth managers see is people looking for ways to reduce taxes in April for the previous year. This does not work. When people start looking forward, their planning is a lot more effective.
Tip #2: Consider Investment vs. Legal Tax Strategies
When it comes to tax planning, there are two different strategies to help you lower your tax bill: Legal and investment.
Legal: Unless you own a business, using tax planning attorneys is expensive and is the most complicated type of planning. For most people, this is not necessary or recommended. If you own a business, however, legal strategies can be very effective. These strategies include forming corporations, fiscal versus calendar year planning, setting up Insurance Captives and many others.
Investment: This strategy tends to be the simplest route for tax reduction. People can invest in different types of assets or projects to lower taxes including oil and gas, conservation easement trusts and other vehicles like solar energy. Let’s look at the options… tax taxonomy image
Tip #3: Go for Secure Investments with Bright Returns
Trusted for decades, oil and gas partnerships come with their own baggage: Unpredictable oil prices mean fluctuating and uncertain cash flows and unreliable investment returns. Because production from every single well in the portfolio needs to be accounted for on an annual basis, oil and gas requires complicated — and expensive — annual reporting with additional tax preparation fees ranging up to $400 a year for decades.
Investing in leveraged charitable gifts like Conservation Easement Trusts is another tax planning strategy. These are very complicated to execute and are highly scrutinized by the IRS. While legitimate and effective, putting this type of planning into action comes with a high risk of an IRS audit; enough to turn most investors the other way.
Solar solves a lot of these issues. With solar investment tax planning, the product is sunshine. Once the systems are installed there is no market risk as with oil and gas.
Solar investments offer predictable, stable, long-term cash flows, ease of tax preparation and clearly defined returns:
A 30 percent federal credit in the year of purchase under current law Simple, strait-line or accelerated depreciation schedule over five years Potentially above-average market returns for the life of the project Solar is not just clean energy – it’s clean investment and is simple in the eyes of the IRS.
Of the different investment tax planning strategies, solar is the easiest to understand, has the lowest potential risk of audit and potentially generates a consistent, predictable cash flow for the entire duration of your project.
Risks to the solar investment strategy primarily deal with the building owner — i.e. the rate payor — and its ability to pay its monthly electric bill. If the rate payor moves out, distributions would suspend until a new rate payor moves in and/or the building is sold.
Tip #4: Pick a Tenant for the Long-Term
In solar, choosing a financially stable tenant with a long history in the building is key. Any risk of the tenant not being able to pay its electric bill for the duration of the contract, or going out of business, needs to be evaluated up front.
Condominiums with multiple tenants paying HOA fees, well-funded churches and charitable organizations with long-term corporate endowments and viable, long-standing businesses all represent predictable, stable investment options for solar.
At SDC Energy our projects undergo a stringent due-diligence process to potentially reduce your solar investments risk.
Through directed philanthropy, we offer socially-minded financing enabling investors to double their impact with tax benefits and cash returns, while helping non-profits save on their electric bills and better fund their community services.
Tip #5: Small Commercial Projects Offer Best Returns
Because size matters in solar financing, SDC Energy and Vanclef Financial agree: small to medium-sized commercial projects make golden solar investments. Compared to the alternatives, we believe to have found the winning niche with commercial projects that range from $50,000 to $500,000. Here’s why:
Residential solar is dominated by a few national installers that are extremely well-funded through large hedge funds; Large-scale commercial projects are often times funded by the corporate end-users that occupy them or from large solar funds with complex financing structures; Utility-scale solar is typically financed by utilities through highly competitive bids and low cost of money.
These segments are crowded, competitive, have high barriers to entry and lower returns for smaller investors. On the flip side, because there is less demand to finance small to mid-sized commercial projects, building owners have fewer options and need to pay a little more to host their own cost-saving solar.
Less competition means potentially higher returns and a winning combination for our investors.
Interested in new investment opportunities to lower your taxes in 2017?
Have required minimum distributions you need to offset?
Learn how solar can generate tax benefits and help you lower your tax bill so that you can pass your wealth on to your family.
Schedule a meeting with your financial planner or contact Vanclef Financial Group for a consultation. Download Jason’s new book, WealthCode 2.0 , to help design your retirement portfolio, income taxes and estate planning the way the super-rich do.
Vanclef Financial Group is the parent company of VFG Securities and VFG Advisors. VFG Securities, Inc. may only solicit or transact business with persons who are residents of the following states: AL | AR | AZ | CA | CT | FL | HI | ID | IL | KY | LA | MD | ME | MI | MO | MT | NC | ND | NE | NJ | NV | NY | OH | OK | OR | PA | SD | TN | TX | UT | WA | WI .
Securities offered through VFG Securities, Inc. Member FINRA / SIPC . Advisory services offered through VFG Advisors, Inc., a Registered Investment Adviser. Tax and legal services are not provided and we recommend that individuals seek professional counsel in those areas. Vanclef Financial Insurance Services: CA License #OF13092.