investing will depend on your particular location and circumstances as well as annual changes in the tax code. I strongly recommended that you consult with a CPA or tax attorney before beginning any real estate transaction or investment. With that said, at the time that I write this book, there are some general tax-related benefits for real estate investors that I want you to know about. The first has to do with all the deductions real estate investors can get: mortgage interest; business expenses, such as property management, office, mileage, travel, educational events, etc.; repairs; and improvements made that increase your property’s value. All of these can be immediately deducted, with the exception of improvements, which are depreciated over time. Depreciation of the property itself, regardless of any work done, is also a tax deduction, and it’s done over the course of time. Commercial properties can depreciate over a longer time than residential (currently 39 years versus 27.5 years). The land on which the property resides never depreciates. If you rent out a property, sometimes depreciation can get you a phantom gain. Here, on paper, the numbers look like a loss; however, because of the depreciation amount, you actually come out ahead. A tax attorney or CPA can help you figure out exact numbers for your situation.
1031 Exchange
Another benefit is the 1031 exchange, which allows you to put off paying capital gains taxes if you use your profit from a real estate sale to buy another property. This makes your income essentially tax-free, and you can put all your profits toward the next property, which is called trading up.
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