The Tax Advantages of Owning Real Estate

Portfolio DiversificationMartin Sullivan once said “There may be liberty and justice for all, but there are tax breaks only for some…” Taxes are an unfortunate part of society, but if you are a wise investor you can limit the amount of your hard earned money that needs to be returned to Uncle Sam.

Although you can easily find tax deductions through charitable giving and business expenses, you can actually lessen your tax burden while still building an asset.

Most people’s largest asset is their home, and getting a tax break here is quite common. Those that own income property can also take advantage of these tax breaks on these assets.

What is an income property?

Income properties generate monthly cash flow for you through rent. Although there are many different kinds of income property to invest in, one of the easiest and most profitable is single-family rentals.

Single-family rentals are incredibly accessible because they have a low barrier to entry while still allowing you to own the asset outright. Furthermore, the tax benefits you find with single-family rentals aren’t available with commercial properties, and commercial properties require a significantly higher up front investment.

What are the benefits of single family rentals?

When purchased in the right neighborhoods, single-family rentals can be quite profitable while still offering numerous tax benefits. Those benefits include:

  • Tax Advantages of Real EstateDepreciation (non-cash expense) deduction from income
  • Mortgage interest deductions from income
  • Deferral of capital gains via 1031 exchange
  • Cost of repairs, maintenance, and upkeep
  • Cost of services (property management & legal consultation or services)
  • Utilities
  • Travel costs associated with the property (checking on the property, inspection, repairs, etc.)

Would you like to learn more about cash flow properties and how easy it can be to own one? Check out our white paper, Be an Investor, Not a Landlord for more information to learn how you can remotely invest in income properties.

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