Investment Updates
Build On The Four Key Tax Pillars Of Real Estate
Published Thursday, December 19, 2013 at: 7:00 AM EST
Commercial real estate can be a productive investment. If rental income flows in, it will provide a steady return on the capital you’ve invested, and if prices rise, you may be able to sell your interest at a profit. Of course, it doesn’t always work out that way. But there also are potential tax advantages that can make such investments very appealing.
There are four key tax advantages relating to rental real estate that you may be able to tap, although a few obstacles could stand in the way.
1. Annual deductions. When you acquire real estate, you likely will have to take a loan and pay interest on it, and you’ll also owe property taxes to the local authorities. Both of those expenses are tax-deductible and can help offset the taxable rental income you receive. Moreover, you can recover the cost of investment property through depreciation deductions. IRS rules specify a cost recovery period of 27.5 years for residential property and 39 years for commercial property. Depreciation is one of the biggest tax advantages on the books and can go a long way toward making an investment in real estate worthwhile.
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