The 7 BEST Tax Write-Offs when Investing in Real Estate!

Here are my 7 favorite tax write offs when it comes to owning real estate or investment property and a few examples of how each of them apply. Enjoy! Feel free to add me on Snapchat / Instagram: GPStephan

Owning real estate is much more than just owning a cash producing property that provides monthly profits, what makes it really unique against almost every other investment is the tax write offs associated with it. In real estate, a return could be calculated in so many different ways besides “I get $1000 per month in rent.” What makes real estate really special is that you could often make money every month, but on paper show a loss…and this cancels out your tax obligation. Here are some of the tax write offs that make real estate a phenomenal investment.

1. Mortgage interest write off - On an investment property, the interest that you pay on your mortgage is a write off against your rental income. On a primary residence, the mortgage interest on the first $750,000 could also be a write off, potentially saving thousands in owed taxes.
2. Property taxes - This is another deduction you can write off against your rental and personal income. As a primary residence, you’re allowed to deduct the first $10,000 of your property tax against your personal income As an investment property, you can still deduct 100% of your property taxes against your rental income.

3. Depreciation - This is what often leads you to be positive in your bank account each month, but on paper you could show a loss, lowering the amount you’d pay taxes on. With rental property, you’re allowed to depreciate the asset over a certain period of time. Cost segregation analysis can sometimes speed this dramatically. However, keep in mind that because you’re depreciating a property, eventually the tax you depreciate will need to be paid at the time of sale if you DON’T 1031 it, so it’s not a tax avoidance entirely, but this works great if you plan to keep the home as a rental or eventually do a 1031 exchange later on.

4. 1031 exchange. This is a very popular real estate tax benefit that almost every real estate investor uses. This means that you can sell your property and “Exchange” it for a like property of similar or greater value without paying taxes at the time of the same sale. This is how many people can buy and sell millions without ever paying capital gains taxes, as long as they don’t sell and continue 1031 exchanging properties.

5. Capital gains exclusion on a primary residence: As long as you’ve lived in the home for 2 of the last 5 years, you can sell a your primary residence up to $250,000 HIGHER than you bought it for if you’re single, or $500,000 if you’re married, without owning capital gains tax.

6. Cash out refinance - When used against a rental property, you can refinance the extra equity in the property and pull out the profits tax free. Even though this is technically a loan you have to pay back, you’re borrowing from the existing equity and using that money without paying taxes on the money that hit your account. This gets a little more complicated as a primary residence, but on a rental, this is a huge advantage because the new mortgage you pay on the amount pulled out counts against your rental income…so you can use this money for pretty much whatever you want, hopefully just to re-invest.

7. Finally, rental property income is not taxed as self employment income, which carries a 15.3% self employment tax (not fun). But keep in mind this is also dependent on how you hold the property and specific ways you’re treating your income.

Disclosure: I am not a tax consultant or CPA. These are just a few tax advantages I have used myself and I have simplified these significantly for purposes of explaining them on YouTube. Check with your own accountant or CPA because every situation is going to be unique.

For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness@gmail.com

Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq

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Видео The 7 BEST Tax Write-Offs when Investing in Real Estate! канала Graham Stephan