Tax Benefits For Beginning Real Estate Investors A Better Than For A Homeowner.

Like most of us facing rising inflation, and the world moving you’re probably wondering: “should I buy rental properties instead of holding my cash in the bank?” Well, be sure to consider that the tax benefit for beginning real estate investors is a whole new way to build wealth. To start with, a powerful tax benefit of real estate investing you can tap into is earning tax deductions using what’s known as rental properties depreciation. It is a big deal and must go into your calculations. Rental properties depreciation is available to investors but not to homeowners. Rental properties a tax benefit of real estate investing can be a game changer for you. In general, buying real estate investments in the United States is a great deal for us relative to almost all other parts of the world and you should take full advantage of that benefit. We all should. Not only can you secure a 30-year fixed-rate loan that never keeps up with inflation, which makes inflation your friend as a rental property owner, but on top of that, there is depreciation. 

“In the US when an investor buys a home for tax purposes it's considered like a car, that goes down in value so you can take a loss come tax season. Investors around the world are gobsmacked by this benefit! “What kind of a country does that?” "Well, a great country.” -Adiel Gorel, Owner of International Capital Group 

Rental properties depreciation is a tax benefit for beginning real estate investors that allows for the recovery of costs related to income-producing rental properties. Investing in real estate is a great way for you and your family to build wealth and reduce your taxes in a variety of ways.

So you’re probably asking, “what is rental properties depreciation exactly?” Depreciation is the recovery of the costs that come with the upkeep of real estate investment properties through your annual tax deductions. Each year, your real estate will naturally begin to show signs of wear and tear. The depreciation deduction is a recompense for that natural “wear and tear,” it’s a tax benefit of real estate investment properties for you as the investor. 

You’re going to love this! Here’s where it gets really good for you. For tax purposes, depreciation is always considered a net loss on real estate investment properties, independent of any profits on the property. Your allowed deduction amount is determined by the property’s market value, the property’s recovery period, and the depreciation method you used. The most commonly used rental properties depreciation method is called the modified accelerated cost recovery system, which allows investors to deduct depreciation on a residential property for 27.5 years! Wow!

Anyone can take advantage of available tax benefits by investing in real estate through what is known as limited partnerships and/or limited liability companies. These provide you with additional business-related deductions you can take advantage of. That is a huge benefit to you as an investor that homeowners don’t get to take full advantage of and another crucial step toward remote control retirement riches. 

Investors just like you have gained great benefits thanks to the Tax Cuts and Jobs Act of 2018. This act enables any of our businesses that earn qualified business income (QBI), which includes rental income, to pass up to 20% of your taxable income. You can do this by using a pass-through deduction. This reduces the effective income tax rate by 20 percent, which is a major reduction. This tax benefit is available until 2025. So the time to act is now. There is a chance it might be renewed after that as well for us. That remains to be seen.

When you get a 30-year fixed-rate loan (another super savvy must-do move), inflation will erode your loan’s value over time. 15 years go by before you know it, and all of your real estate investment homes are worth a million dollars each, for example, just to make the math simple. An investor has a lot of taxes to pay, right? But you can be the smart investor who chooses to do another 1031 exchange to expand your portfolio. This move will have you skipping down the path of becoming financially free, and still not having to pay all that depreciation recapture. Those are some pretty astonishing tax benefits of real estate investing for you.

There are even more deductions for you to take advantage of and Adiel Gorel is hosting a free virtual event to answer the questions and of course the most pressing question of 2022 which markets to invest in during this time. Don’t miss out, click icgre.com. Adiel G

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Created on Oct 7th 2022 23:01. Viewed 102 times.

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