• Depreciation: For physical real estate investments, such as rental properties, the Internal Revenue Service (IRS) permits investors to deduct the cost of buying and improving a property over its useful life, a process known as depreciation. This can be a significant tax deduction that reduces your taxable income from the property, even though it’s a non-cash expense.7 • 1031 exchange: This provision enables investors to defer paying capital gains taxes on the sale of an investment property as long as the proceeds are reinvested in a similar property. A 1031 exchange can be a useful tool for growing your real estate investments tax-deferred.8 • Pass-through deduction: Under certain conditions, investors in real estate ventures such as limited partnerships (LPs) or limited liability companies (LLCs) are eligible for a pass-through deduction, which allows them to deduct up to 20% of their business income.9 • Capital gains: Long-term capital gains from real estate investments are frequently/ordinarily/usually/typically taxed lower than ordinary income, especially for properties held for more than a year.10 • Deduction of operating expenses and mortgage interest: For rental properties, operating expenses such as maintenance, utilities, property management fees, and mortgage interest can usually be deducted, reducing the taxable income generated by the property.1112 • Real estate crowdfunding: Depending on the structure, investments made through real estate crowdfunding can offer similar tax benefits to direct property ownership, like depreciation and interest deductions. It’s important to note that tax laws can be complex and are
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