Adiel Gorel, the owner of ICG, putting on a free zoom event. Adiel has helped 1000s of folks benefit from knowing the best tax benefits of real estate investing, and choosing the best rental properties to secure their financial future. Find out about rental properties, and the best places to invest in 2022 here icgre.com/guide
Like most people, you are probably considering buying real estate now that the rates are so low, and searching for the best tax benefits of real estate available for investors. A powerful tax benefit of real estate investing is earning tax deductions using what’s known as rental property depreciation. It is an important factor to consider and it’s available to investors but not to homeowners. In general, buying real estate investments in the United States is a pretty sweet deal relative to many parts of the world.
Investing in real estate is a great way for you and your family to build wealth and reduce taxes in a variety of ways. Depreciation allows for the recovery of costs related to income-producing rental property.
“When I tell people in countries outside the U.S. how when an investor buys a home for tax purposes it's considered like a car, that goes down in value so you can take a loss. They are astonished! What kind of a country does that? Well, a great country. A country you can build wealth in.” -Adiel Gorel, owner of International Capital Group (ICG)
What is rental property depreciation exactly? Depreciation is the recovery of the costs that come with the upkeep of real estate investment properties through your annual tax deductions. As each year passes, the real estate naturally begins to break down. The depreciation deduction is in essence a recompense for that natural breakdown, commonly called “wear and tear,” it’s one of the best tax benefits of real estate investment properties for you as the investor.
Here’s where it gets really good. For tax purposes, depreciation is always considered a net loss on real estate investment properties, independent of any profits on the property. Your allowed deduction amount is determined by the property’s market value, the property’s recovery period, and the depreciation method you used.
The most commonly used rental property depreciation method is called the modified accelerated cost recovery system, which allows investors to deduct depreciation on a residential property for 27.5 years! Wow!
Investors gained some great benefits thanks to the Tax Cuts and Jobs Act of 2018. The act enables businesses that earn qualified business income (QBI), which includes rental income, to pass up to 20 percent of their taxable income. Investors can do this by using a pass-through deduction. This reduces the effective income tax rate by 20 percent, which is quite the reduction. This tax benefit is available until 2025. However, there is a chance it might be renewed after that as well.
You can take advantage of the best tax benefits by investing in real estate through what is known as limited partnerships and/or limited liability companies. These provide you with additional business-related deductions. That is a huge benefit to you as an investor that homeowners don’t get to take full advantage of.
When you get a 30-year fixed-rate loan, (another smart move) inflation is not going to erode the value of your loan over time. Another 15 years go by, and all of your real estate investment homes are worth a million dollars each, for example, to make the math easy, an investor has a lot of taxes to pay, right? Always searching for the best tax benefits of real estate investing can spin anyone out. But you can be the wise investor who chooses to do another 1031 exchange to expand your portfolio and have you skipping down the path of becoming very wealthy, and still not having to pay all that depreciation recapture. Those are some pretty spectacular tax benefits of real estate investing for you.
There are even more deductions for you to take advantage of and Adiel Gorel is hosting a free virtual event to answer your questions and of course the most pressing question of 2022 which markets to invest in during this time. Don’t miss out, click icgre.com/guide. Adiel Gorel has helped thousands of investors like you understand the best tax benefits of real estate investing and build their financial security through real estate investing.
