Susan Ormont - RISK VERSUS REWARD: A SIMPLE GUIDE FOR INVESTING IN REAL ESTATE

TAX BENEFITS FOR REAL ESTATES INVESTORS Because both federal change and state local taxes can vary, and Massachusetts taxes are changing, there’s no specific guidance I can give about that here. Also, please understand that the tax ramifications of any kind of real estate investing will depend on your particular location and circumstances as well as annual changes in the tax code. I do not pretend to be a tax expert so I strongly recommended that my clients 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.

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