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,email@example.com
Good luck, Paula - it's never to early or too late to start investing in real estate!
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.