Who HATES paying taxes?!
We get you… SO, we have a HUGE tax loophole to share with you that could save you BIG!!
(Disclaimer: we’re not giving tax advice. Discuss with your CPA.)
One of the AMAZING things about real estate is the NUMEROUS tax benefits. Many of them apply to your primary residence, BUT When you own an investment property, the IRS lets you use depreciation of the asset as a write off. This is one of the BEST wealth building tools in real estate!
Think about that:
Even though real estate usually appreciates, you still get to depreciate it annually to save big on your taxes!
Even if you MAKE money on your investment property, after you factor in the depreciation, it usually ends up looking like a loss on your taxes! (that‘s a GREAT thing for tax savings!)
Here's the kicker...
Unless you’re a realtor, you generally have to have other PASSIVE income to get the benefit of that ‘loss.’ (AKA it’s NOT actually a writeoff against your W2 income.)
So, there are TWO options, if you want to take advantage of depreciation –
- Quit your job and become a realtor, OR…
- Apply this tax loophole!
You need to do three things to take advantage of it:
- Buy a short term rental property (think: for Airbnb or VRBO)
- You have to “materially participate” in the management – AKA, you need to oversee the “business” and not hire a property manager to do it for you.
THEN… Once you close on the home, you will do a *cost segregation study, and this is where the savings REALLY come in!
*This study helps you to accelerate some of the depreciation, which further reduces current income tax obligations!
