Taxes are an essential component in any business, and real estate investing is no different. Fortunately, there are enormous tax benefits in owning residential real estate. Being strategic about taxes year-round can totally change your experience and perspective on the tax code.
The first reason why real estate investing can help you save on your taxes is that real estate investments are tax deductions. The government wants to encourage investors to improve communities, and invest in growth. The way I look at it is, you can either write a $40,000 check to the IRS every year, or you can use that money to invest in a cash-flowing property. It’s a no-brainer!
Secondly, real estate depreciations work in your favor as an investor. This doesn’t apply to your primary residence, but investments are different. You can claim depreciation expenses on your investment properties. This can be an immense deduction, and any knowledgeable accountant will be able to help.
Additionally, some personal expenses can be business deductions. When your investing journey becomes a business, it is taxed as so. Businesses don’t pay taxes on the money they spend on business expenses. Any legitimate business purchases can be tax write-offs.
If you want to expand your knowledge on the US tax code, check out my interview with tax genius, Tom Wheelwright!