4 mins
September 27, 2022

FGCP™ Quarterly Considerations: Finding Tax Efficient, Cash Flowing Investments for our Current Economic Landscape

FGCP™ Quarterly Considerations: Finding Tax Efficient, Cash Flowing Investments for our Current Economic Landscape

Learn more about the Q3 economic trends that are most directly impacting Accredited Investors, as well as some useful strategies for continuing to build wealth for the rest of 2022.

Are you feeling overwhelmed by all the headlines and conversations about inflation, interest rates, and even recession? We know the feeling. It’s hard to keep track of everything that’s happening in today’s economy, especially because many of the experts don’t even agree about what’s going on and how to best address it. 

The important thing to remember, however, is that you can still find strong opportunities to grow your wealth, regardless of the economic conditions around you. To do this, start by focusing on your goals and then seeking out investments that both make sense for the present and serve as a vehicle that will move you closer to your target destination. 

To help you sort through some of the biggest trends and economic factors that might impact your portfolio, here’s an overview of what our team is paying the closest attention to as we head into Q4. 

Inflation Slows Down Among Interest Rate Hikes

When inflation is high, the Federal Reserve will often increase interest rates in an effort to slow down the economy’s growth. Last week, the Fed increased rates for the fifth time in 2022, up to 3.25%.

In the midst of these increases, inflation has slowly started to decline this summer, but not before hitting a peak of 9.1% in June. This was especially momentous, because inflation has not crossed the 9% threshold since 1981. 

While inflation rates did drop to 8.3% in August, this is not as significant a decrease as some economists hoped for, especially as interest rates continue to rise. 

There’s still plenty of debate about what this means for the economy as a whole, but if you’re an investor, one important thing to keep in mind is how inflation rates compare to your projected returns. Keep in mind that this 8.3% is still higher than most average real estate returns, which tend to fall around 7-8%. If you’re looking to generate income in the short-term, real estate investing is likely not the best vehicle to achieve this. 

And since interest rates are the highest they’ve been since 2008, you will likely want to wait to purchase new real estate at this time. However, nothing is cut and dry, and we do still believe that when chosen wisely, real assets like real estate are valuable tools for long-term appreciation.

Energy Price Increases Slow 

While energy costs still showed a 23.8% year-on-year increase in August, this was the smallest increase we’ve seen since March of 2021. However, natural gas and electricity costs continue to rise.

We believe that these current conditions present an excellent opportunity for Accredited Investors interested in taking advantage of the unique incentives this industry can offer.

In particular, we’ve identified carbon capture technology as a powerful investment vehicle for generating returns and also accessing previously unheard of tax advantages against active income. 

White and orange text on a blue background: "Why should you invest in carbon capture? Discover the unmatched tax benefits. Learn more"

Preparing for the Bonus Depreciation Phase Out

One of those key advantages of investing in carbon capture is the ability to claim bonus depreciation. With bonus depreciation, investors can claim deductions on eligible assets in the first year, rather than claiming depreciation across a longer period of time. 

Bonus depreciation is about to expire, so if you want to be able to claim a 100% deduction, you need to invest in assets that will be placed in service before Jan. 1. In 2023, the deduction will decrease to 80%, then 60% in 2024, and so on.

You may have heard bonus depreciation discussed in the context of real estate investing, but it is even more advantageous when applied to carbon capture technology. In most cases, when you invest passively in real estate, depreciation only impacts the income you generate through your passive investments, not your earned, W-2 income. 

When you invest in carbon capture technology, on the other hand, the amount you invest is deductible against your earned income. When combined with bonus depreciation, this creates massive income tax savings that you cannot achieve through other investment vehicles.

If you want to take full advantage of these benefits before bonus depreciation phase out begins, now is the time to invest. To learn more about investing in carbon capture technology and see some specific examples of how much money you can save on taxes, we encourage you to check out this free guide. And if you’re interested in talking with us about the next steps we can take to help you reach your goals, please fill out this form to get in touch.

date
September 27, 2022
author
Billy Keels