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Tax Benefits of Real Estate Investment

Investors dealing in real estate get the maximum tax benefits in the name of deductions. Tax benefits of real estate investment are many, and these breaks in taxes are helpful to a lot of people dealing with real estate as their full time business. The important benefits of investing in real estate are increase in property value due to appreciation, good cash flow in the form of rental income and some incredible tax benefits. One of the tax benefits of real estate investment are there are lower taxation rates on your capital gains. The gains that investors get from selling their real estate investment property are termed as capital gains which are of two types as mentioned below. The catch in depreciation as a tax benefit of real estate investment is that when you sell the property, that entire deducted amount may be taxed at a 25% rate, in addition to any other capital gains taxes. 1031 Exchange As a real estate investor you can use this tax code called 1031 Exchange to sell a property and use the profit to buy a new one which is of equal or greater value. When you choose to sell your property, you are required to pay taxes for your capital gains. IRS considers that you are exchanging you old property for another real estate property. You’ll need to pay taxes when you sell the property, but you can use that money right now with no tax at all.