Written By: MB Group
Did you know approximately 90% of the world's millionaires have created their wealth through real estate investing? Whether you're looking to pick up your first rental property or considering adding a commercial unit to your portfolio, there are also several tax benefits of owning real estate.
At MB Group, we offer an exclusive real estate tax service to help real estate professionals and investors maximize the tax benefits of owning real estate. Let's take a closer look at a few of the key tax benefits of real estate investing.
Without a doubt, one of the most essential tax benefits of investing and owning real estate are the tax deductions available is the ability to deduct certain expenses. The deductible expenses must be related to the property, such as:
If you're like a large number of real estate investors, you can invest in real estate through a business entity, such as a limited partnership or LLC. When you do, you open the door to several other potential tax deductions, such as:
However, it's critical to make sure you keep receipts or documentation of all of the expenses related to running or growing your budding real estate empire.
If you sell a home or property for more than what you purchased it for, the gains or capital gains are taxed differently than standard income. Instead of paying the higher income tax, the gains will be handled under the capital gains tax, which is typically lower. The capital gains tax can be classified as one of two types:
And you can even use special tax-free or tax-deferred methods of investing in real estate to avoid paying capital gains tax. The experts at MB Group can work closely with you to execute a strategy most closely aligned to your wants, needs, and goals.
Did you know if you own a property for income-producing purposes for a year or more, you can actually depreciate the cost of the property over a period of time? This practice allows you to deduct the loss of value of the property over a period of:
In the most simple sense, depreciation allows you to account for a decrease in value of the property for standard wear and tear. For example, if you purchased a home for $300,000, you could deduct approximately $10,909 ($300,000/27.5 years) each year for depreciation. In addition, you may be eligible to deduct certain types of capital expenses, such as installing a new HVAC system or replacing an older roof. These types of improvements can help provide more deductions on your taxes.
Choosing to invest in real estate is one of the proven ways to build wealth. While there are real estate investing risks, most successful real estate investors will suggest the benefits outweigh the costs. And if you're considering investing in real estate, the team at MB Group offers years of experience working with individuals and business owners to lower tax liability through innovative tax planning strategies. We'll work closely with you to create a plan that helps you achieve your goals and maximize all of the tax benefits of real estate investing.
Tags: Real Estate
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