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Paula Frankel, Home Buyer in Petaluma, CA

Any tax benefits from buying an investment propety?

Asked by Paula Frankel, Petaluma, CA Thu Mar 25, 2010

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Dear Paula,
There are many types of tax benefits depending on the property type, how is it used, how it is held (ownership type), how long it is held, if it is eventually sold for another investment property, other lossess you might have from other investments, etc., etc. Your tax advisor will be able to give specifics to your personal situation, but some of my favorite tax benefits are:
- indefinite postponement of capital gains taxes, even when you sell and buy another investment property
- writing off depreciation expense against your income (i.e., a non-cash loss against a cash gain)
- using IRA funds to purchase real estate so that your capital gains are forever tax-free
Note: all of these require carefully following IRS rules!
If you need a really good CPA who knows a ton about real estate, I have a great one in San Rafael who I can refer: Larry Smith, Smith CPAs, 415-458-5100,smith@smithcpas.com
Good luck, Paula - it's never to early or too late to start investing in real estate!
0 votes Thank Flag Link Thu Mar 25, 2010
Many benefits. Property tax becomes an expense vs. a deduction as an owner/user. All expenses like insurance, utilities, landscaping, etc. are expenses. Interest on a loan is an expense instead of a deduction. You are also able to use depreciation expense to reduce your tax liability. This is a book expense and does not actually impact your cash flow, but helps reduce your taxes.

All of this items have varying impact depending on your tax rate and other tax related factors. Speak to your tax account to get more details or give me a call if you have general questions.

Good luck and happy investing.
Web Reference: http://www.charityar.com
0 votes Thank Flag Link Thu Mar 25, 2010
good afternoon paula...yes, there are several tax advantages to buying investment property..it is more of a tax accountant question...great time to buy...figure at leadt 20% down unless you are a cash buyer....best regards....bob mcclure- first preferred mortgage- southfield, michigan......
0 votes Thank Flag Link Thu Mar 25, 2010
Absolutely! Also consider the risks such as loss of rents and eviction process should you end up with a loser tenant. The best place to get advice is from a CPA.

All the Best,
0 votes Thank Flag Link Thu Mar 25, 2010
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