Real Estate Investment and Tax Benefits

Real Estate Investment and Tax Benefits

There are numerous reasons to invest in real estate. You've probably heard terms like leverage, stability, cash flow, capital gain, etc.

These are all great reasons to invest in real estate, and we'll go over them later, but the number one reason, in my opinion, is the tax savings. Taxes are the single highest expense you have ever had and will ever have. Saving money by driving less, shopping at Wal-Mart, and clipping coupons are all good ways to lower your monthly expenses, but they affect your net income. Reducing taxes will improve your bottom line by increasing your NET income. How may real estate investment help you save money on taxes? When you invest in real estate, you enjoy several tax benefits:



Deductible Expenses

Tax Credit

Depreciation! The government has made it a policy to encourage people to own real estate. Depreciation is one of the government's incentives for investors. Even though real estate properties often increase in value over time, the government permits you to declare a "loss" of value every year for the property's existence. For example, residential property has a "lifetime" of 27.5 years. So, if your investment property was purchased for $275,000, you can record a $10,000 "loss" each year, lowering your TAXABLE amount by $10,000 each year! As a result, if you earn $100,000 per year, you will only be taxed on $90,000. The investor's hidden cash flow is depreciation.

Equity! The real estate market tends to rise over time. True, there are years when the market rises and others when it falls, but if you look at any property over 15-30 years, you'll notice that the value has increased most of the time. As your property value rises and your loan decreases, the ratio between the property value and the loan decreases, allowing you to refinance and access the equity in your home. This money you take out of your house is TAX-FREE!!! It is tax-free because it is a loan rather than an income. When you buy stocks, you must sell them to realize a profit, and then you must pay taxes on that profit. You take out equity in the form of a loan in real estate, and this money is tax-free; plus, you don't have to sell the house!

Deductible Expenses! You are running a business when you invest in real estate. In contrast to other investments, real estate investing qualifies as a business for tax purposes. You can deduct your connected car expenses when browsing for properties. You can remove the cost of hiring a plumber or an electrician to fix something at the rental property from your rental revenue. You can deduct a variety of other expenses from your income. Consult a professional public accountant to see what can be removed in your specific situation.

Tax Credit! The federal government will grant you a CREDIT on your taxes if you accomplish specific tasks related to real estate. You can, for example, credit the following percentage:

If you are looking for more information, you can consult with Joshua Mitchell Tupelo, ms. He specializes in real estate investment.

Joshua Mitchell Tupelo ms is the officer of a credit repair company. With his ideas, you can make the best investment. He provides the best solution for all your tax-related problems. Get in touch with him.