Tax Benefits of Investing In Real Estate

Tax season is right around the corner and as an investor, you should be aware of all your options when it comes to filing. We’ve broken down three benefits that are commonly looked over that you may want to consider when you go to file this year. 

Benefits of Real Estate Investments

1. Depreciation

   1. Because you own a property that has a loss in value over time, you’re able to deduct this when filing your taxes. The result is lower taxable income with the potential for a reduced tax liability. 

   2. The flip side to this is being aware that when and if you sell your property, you will have to pay taxes on the deductions you have taken at the current standard rate.

   3. When you go to file this year, make sure to take a look at any major updates or changes you’ve made to your property that you could deduct.

2. Deductions 

   1. Depreciation is just a small percentage of the deductions you can take when filing your taxes as a property owner. Here’s the basics on what you can deduct: 

      1. Interest 

      2. Property Taxes 

      3. Property Management Fees 

      4. Insurance

      5. Marketing Efforts

      6. Software You Pay For

      7. Travel 

      8. Office Space 

      9. Phone Plans

   2. This is just the beginning of the different deductions you may be able to make when you file. If you’ve got an accountant (by the way that’s another deduction), make sure you ask them about all of the options you have. 

3. Capital Gains

   1. If you’ve recently sold a piece of real estate, you must be aware of how that will affect your yearly income. There’s two sides to this, short-term and long-term gains, that each work a little differently. 

      1. Short-term gains

         1. If you sell a property within a year of purchasing it, you will have short-term gains. What this means is that whatever you sell the property for, is added income on your taxes and may place you in a higher bracket. 

      2. Long-term gains

         1. If you wish to sell your property and can wait until you’re past the one year mark, you can benefit from long-term gains. The long-term tax rate is significantly lower than the short-term making it a more appealing option. And in some cases, depending on your income, you may not even have to pay the taxes on the sale. 

These are just some of the advantages of taxes as a real estate investor. Be sure to consult a professional if you have any questions when filing, and if you’re looking to expand your investments this year, let our team at WiscoTurnkey create a plan that meets your financial goals.