Secret Real Estate Tax Tips that can Save you Money

It is a proven fact that those who have accumulated substantial wealth are better able to maintain their wealth simply by taking advantage of tax credits and tax breaks. Tax benefits can be derived not only from smart general income tax preparation but also highly efficient real estate tax preparations and considerations. In many cases the most tax benefit can be gained by owning a second home or an investment property as opposed to a primary residence. Investing in Anacortes real estate is an excellent way of building wealth especially when real estate tax implications are considered and effectively maximized.

Safe Harbor Rules

The first example of a way to save money when it comes to real estate taxes is to take full advantage of all safe harbor rules. This suggests that if you are the owner of a second home, it may be worth renting out the property especially if it is not being used. Tax rules vary based on how long an owner uses their home in terms of total number of days per year. Talk with your tax professional to find out the specific rules as they apply to safe harbor. Depreciation of rental property is another key consideration that should never be overlooked. The IRS views a rental property as a business expense.

Depreciation Losses

As such tax rules allow a property owner to deduct depreciation losses for a specific time span. This is another case where talking with your tax professional can help you to determine how best to target depreciation write-offs to save money on a real estate investment. One important concept when it comes to depreciation is that houses typically appreciate in value as opposed to depreciate. This is a key idea in that as a property value increases depreciation actually never takes place. As a result, property owners save on taxes and profit on the value of their home as it's worth rises.

1031 Exchange Rule

Equally important is to take full advantage of what is known as the 1031 exchange. When a property owner sells a rental property they can avoid paying any capital gains by simply reinvesting the proceeds of the sale into the purchase of another property that is more expensive. This rule can be complicated and that is why is important as stated earlier to always consult with your tax professional. The 1031 exchange rule can help property owners maximize the value of their real estate investments while avoiding the danger of eroding capital by having to pay the IRS capital gains taxes. Consider these simple yet important tips on how to save money on taxes as a real estate investor. Contact Nicole Haun today to learn about more investing in real estate in Anacortes Washington.

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