Top 10 Tax Advantages of Investing in Real Estate

Top 10 Tax Advantages of Investing in Real Estate

1 min read
Paul Moore

Paul Moore is the managing partner of Wellings Capital, a private equity real estate firm.

Experience

After college, Paul entered the management development track at Ford Motor Company in Detroit. After five years, he departed to start a staffing company with a partner. They scaled and sold the company to a publicly traded firm five years later.

After reaching financial independence at the age of 33 and a brief “retirement,” Paul began investing in real estate in 2000 to protect and grow his own wealth. He completed over 85 real estate investments and exits, appeared on HGTV’s House Hunters, rehabbed and managed dozens of rental properties, built a number of new homes, developed a subdivision, and started two successful online real estate marketing firms.

Three successful commercial developments, including assisting with the development of a Hyatt hotel and a very successful multifamily project in 2010, convinced him of the power of commercial real estate.

Press

Paul was a finalist for Ernst & Young’s Michigan Entrepreneur of the Year two years straight (1996 & 1997). Paul is the author of The Perfect Investment – Create Enduring Wealth from the Historic Shift to Multifamily Housing (2016) and has a forthcoming book on self-storage investing. Paul also co-hosts a wealth-building podcast called How to Lose Money and he’s been a featured guest on 150+ podcasts, including episode #285 of the BiggerPockets Podcast.

Education

Paul earned a B.S. in Petroleum Engineering from Marietta College (Magna Cum Laude 1986) and an M.B.A. from The Ohio State University (Magna Cum Laude 1988). Paul is a licensed real estate broker in the state of Virginia.

Follow

WellingsCapital.com
Email [email protected]
LinkedIn
Twitter @PaulMooreInvest
How to Lose Money podcast

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The tax savings of real estate investing are pretty incredible. In fact, tax laws are set up for real estate investors to avoid taxes if we arrange our affairs appropriately.

Here are some of the most important benefits and strategies to note.

Related: The Ultimate Guide to Real Estate Taxes & Deductions

Key Tax Benefits & Strategies for Real Estate Investors

  1. Hire a tax strategist or real estate-focused CPA, who can help save you up to hundreds of thousands of dollars by taking advantage of a host of tax-filing approaches you might not know exist.
  2. Be a direct investor in real estate, in which case you’ll receive a K-1, allowing you to maximize your deductions and maximize your income.
  3. Utilize cost segregation studies to assist in accelerating your depreciation, enabling you to write off more in a shorter timeframe.
  4. Correctly classify deductible expenses in order to maximize your write-off.
  5. Consider returning capital to you and your investors rather than distributing income in order to avoid taxes and increase deductions.
  6.  Refinance tax-free and reinvest the proceeds somewhere else to maximize your income and continue to grow your wealth.
  7.  Take advantage of the 1031 exchange, which means exchanging a property for a like-kind property and deferring capital gains tax.
  8. Avoid passive loss limitations by becoming a qualified real estate professional (QREP), allowing you to maximize your passive losses in the current year as opposed to carrying them forward.
  9. Use retirement options, including self-directed IRAs, self-directed Roth IRAs, solo 401(k)s, and whole life policies to operate and gain income tax-free.
  10. Reset basis at death, meaning passing real estate to your heirs at your death. By doing so, they may pay zero capital gains tax.

Check out my video above, where I delve further into the ways in which recent changes in tax laws have positively benefited real estate investors.

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Do you have a tax strategist or CPA who is knowledgeable about real estate? Are you getting the most out of the tax benefits available to investors?

Let’s discuss in the comment section below. 

The tax savings of real estate investing are pretty incredible. In fact, tax laws are set up for real estate investors to avoid taxes if we arrange our affairs appropriately. Here are some of the most important benefits and strategies to note.