January 15

How to Receive Tax Benefits as a Real Estate Investor

Are you weary of endlessly shelling out your hard-earned profits to Uncle Sam? 

As a Real Estate Investor, you are always looking for ways to maximize your profits. You work hard to find great deals on properties, get them renovated quickly, and sell or rent them out as soon as possible. But did you know that there are tax benefits available if you properly structure your business? That’s right, by understanding how the tax code applies specifically to Real Estate Investors like yourself – along with knowing which deductions can be claimed –you can help reduce your personal taxes and increase the overall profitability of your flipping business.

Learn more about what tax benefits are available to Real Estate Investors below!

Depreciation Deductions 

As an investor, one of the most important things you should take advantage of is depreciation deductions. When you purchase a property, the IRS allows you to depreciate it over 27 years—that’s right, 27 years! That means that every year, a portion of the cost can be written off as a deduction against your income taxes. This deduction can be especially helpful if the property is currently generating positive cash flow or if it will generate positive cash flow in the future. 

Expense Deductions 

Another way to receive tax benefits as a Real Estate Investor is by taking advantage of expense deductions. Any expenses associated with improving or upgrading a property can be written off as deductible expenses. This includes costs associated with repairs, renovations, landscaping, marketing efforts, legal fees, or any other expenses related to improving or maintaining the property’s value.  

Capital Gains Exclusion 

Finally, when it comes time to sell your property at a profit (also known as flipping it), there may be an additional tax benefit available depending on how long you have owned it for—up to $250k for single filers and up to $500k for joint filers. Known as capital gains exclusion (CGE), this allows investors who have held onto their properties for at least two years before selling them to exclude up to half of their profits from taxation—effectively reducing their overall capital gains tax burden significantly!  

Taxes don’t have to be complicated! As a Real Estate Investor, there are several ways that you can benefit from your investments when it comes time to file taxes every year. Whether it’s through depreciation deductions or capital gains savings, understanding these options can help ensure that your investments continue providing returns long after the flip is finished! With detailed records kept throughout the process, navigating taxes doesn’t have to feel overwhelming—it just takes some preparation on your part!

When in doubt, talk to a qualified accountant or tax specialist to make sure that when filing taxes, every possible deduction is taken advantage of and nothing slips by. This will guarantee that come crunch time you get absolutely everything out of it!

Ready to get started on your next Fix-N-Flip? Get a free quote from us today!

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