Posted On 4 Tax Benefits of Real Estate Investment
Posted On
Posted By Desiree Nance
Real estate investment comes with numerous benefits, including tax benefits. You can enjoy a good deal of tax benefits that investors of other assets don’t get. With the help of Brunswick accounting and tax services, you can always get rid of any implications and enjoy only the benefits.
So, what are the tax benefits of real estate investment? Check the list below:
Revenue Gets Taxed at Lower Rates Than Normal Income
As a real estate owner, you can depreciate the property cost over 27.5 years even if its value increases every year. Thus, you can save thousands of dollars of paper losses on your property, which you can use to offset rental income or other profits. The huge deduction with several other tax-deductible expenditures allows you to apply against the property’s revenue every year. Your revenues will tend to be taxed at a rate that is much lower than personal/corporate earnings.
Carry Forward Your Rental Losses
Even though passive-income losses have limitations, the tax code helps you to occupy your investment property in any year. You can carry forward losses that exceed the amount. You can write down your taxes, bringing forward a previous year’s loss when your investment starts generating huge profits that depreciation and other deductions don’t cover fully. You may have zero tax bills even after making massive profits on the real estate property.
Capital Gains are Much Lower Than General Income
As real estate sales get taxed like capital gains, you will be taxable for long-term capital gains if you hold a property for over a year. You will get taxed at the short-term rate of capital gains, which is the same as the normal income rate if you sell an investment property a year after buying it. It’s one of the key reasons to hold long-term real estate investments.
Private Real Estate Fund Investment
The federal tax code usually considers real estate funds as pass-via entities, which means all the earnings and losses apply directly to the owners. Being an investor in the appropriate private real estate fund, you won’t have to face the double taxation mostly paid by a corporation’s shareholders, which is the way the tax code considers REITs. You will get taxed only on the share of your fund’s reported losses or earnings for the specific tax year, and usually at the lesser long-term capital gains rate.
The Bottomline
So, these are the major tax benefits of real estate investment that you should know. As a real estate investor, you can always hire accounting and taxing experts if any tax-related complications occur.
