Quick post today regarding taxes! Who doesn’t love taxes? Although it’s a somewhat boring toping, taxes play a HUGE role in real estate. If you’re a real estate investor these become more and more important. There are several potential tax advantages to owning real estate. Some of the most common tax benefits include:
- Deduction of mortgage interest: If you have a mortgage on your property, you may be able to deduct the interest you pay on your loan from your taxable income. This can provide a significant tax savings, especially in the early years of a mortgage when the majority of your payment is interest.
- Deduction of property taxes: In most cases, you can also deduct the property taxes you pay on your property from your taxable income. This can provide a significant tax savings, especially if you live in an area with high property taxes.
- Depreciation: If you own a rental property, you can depreciate the value of the property for tax purposes. This means you can claim a deduction for the cost of the property over its useful life, which can provide a tax savings even if the property has appreciated in value.
- Capital gains exclusions: When you sell a property, you may be able to exclude some or all of the profit from capital gains taxes. For example, if you sell a property that you’ve lived in as your primary residence for at least two of the past five years, you can exclude up to $250,000 of the profit from capital gains taxes (or up to $500,000 if you’re married and filing jointly).
These are just a few of the potential tax advantages of owning real estate. It’s important to consult with a tax professional to determine what tax benefits you may be eligible for based on your specific situation.