One of the best ways to earn money is to invest in real estate property.
Whenever you purchase a rental home, you can depreciate the property over twenty seven and a half years. You would then earn a tax deduction every year equal to the total value of the structure of your property and divided by twenty seven and a half years.
With this example, it’s easy to see how investing in real estate property can be lucrative not only from the standpoint that your property may rise in value, but the fact that you’ll get a massive tax deduction as well.
Here are four tax tips for real estate investors:
Tax Tip #1 – Find A Good Certified Public Accountant (CPA)
Specifically, you’ll want a CPA who is also a real estate investor. This way, they will truly know the ins-and-outs of how to save money when investing in real estate.
If you currently are having trouble finding a CPA who’s also a real estate investor, the best place to search will be a real estate investment club.
Tax Tip #2 – Take Advantage of Long Term Savings
You’ll definitely want to take advantage of long term savings when you invest in real estate. One way to go about this will be to conduct a cost segregation study on your property, which will categorize the assets of the property into the most and least tax advantaged depreciable ones.
This will then help determine if an if the asset is a component of the building or of your personal property. If it’s a component of the building, it can be depreciated with a nearly forty year tax life.
Tax Tip #3 – Hold Your Property For Over A Year
Another solid investment strategy to follow will be to hold your property over a year. This way, you’ll pay less money to the IRS.
When you ‘flip properties’ within just a matter of weeks or months, this means that you’re holding an asset for less than one year, which means you’ll be charged at the income tax rate (and the highest income tax rate is 37% for 2018).
In contrast to this, holding the property for over a year means you’ll be subject to a long term capital gains tax instead, which maxes out at 15%.
Tax Tip #4 – Turn Your Investment Property Into Your Primary Residence
By establishing your investment property as your primary residence, you can avoid paying a capital gains tax altogether. The only real criteria is you need to live on the property for at least two years within the last five years.
Tax Tips For Real Estate Investors
Real estate investing truly can be one of the most profitable money making opportunities you ever do in your life, and these tips we have covered here today will further help you to save money when it comes time to file your taxes.