5 Tax Tips for Real Estate Investment Properties
Posted by Techyscouts | Posted on 05/23/2022
Real estate can be purchased for many reasons, and Mike Millea can be at your service for any of them. From residential to commercial, investments, and trust and probate transactions, Mike and his team in the South Bay area can provide the expertise and advice needed to get the deal done.
What’s a real estate investment property?
Many clients come to Mike for assistance in making real estate investment deals. Investing in property can include purchasing homes to flip, rent out, or turn into vacation rentals. It can also include commercial property, where a portion of the building is rented out to other businesses. The end goal is to get a return on your investment as a profit. Aside from the obvious financial aspects, there are more complicated matters that can lend themselves to your overall success.
Real Estate Taxes
When owning property, you will be responsible for paying taxes. However, when it comes to an investment property, certain things can work to your advantage. Follow these five tax tips for your investment properties:
- Write It Off: When you own an investment property, deductions will be your friend. Expenses that are tied to your investment, from maintenance to property taxes, to items such as advertising and equipment, can be included as a tax write-off. A qualified CPA will help you recognize relevant deductions.
- Know about capital gains: If you are in the business of buying and selling for profit, pay attention to capital gains. Depending on the length of time you’ve held the property, and the profit you make, either short-term or long-term capital gains tax will apply. Rates can fluctuate, so pay attention and research this information before making any moves. Additionally, programs like 1031 exchanges can help you defer that capital gains tax if you are selling one property to acquire another.
- Research incentive programs: Depending on where your property is, there could be tax deductions and programs specific to the area. Often, tax abatement or relief programs exist in rural, low-income, or historic areas. Researching local markets can help determine if these are options.
- Use pass-through deductions: If your investment property is owned on your own, through an LLC or an S-Corp, you may be able to deduct up to 20% of your qualified business income on your taxes. Again, consulting with a CPA will give you the most detailed information regarding this process to confirm it applies, but it’s a perk worth pursuing.
- Keep Good Records: It should go without saying but keeping organized and thorough records will help you come tax time. A tax professional will be able to explore the paperwork and pull out relevant information that can benefit you.