HELP ME LIST OF ALL THE TAX BENEFITS OF OWNING RE PLEASE!

5 Replies

Help me make a comprehensive list of all the tax benefits of owning rental real estate!

So far I have:

-Depreciation =deduct home price (divided by 27.5) from your income, rental for active income

-Rental income is taxed less than active income (what is it, like 15%)

-Ability to set up corporation to pay less taxes (would this be the 7.5 ssn, or are there others), deduct all expenses related to business activities (gas driving to rentals, CPA/Attorney fees, home office possibly, etc.)

-Deduction of expenses & mngt fees from rentals 

-Deduction of mortgage int paid & lending costs 

-Additional tax sheltering if investing through a SDIRA or 401(k)

-1031 exchange, pay no capital gains if investing money made into another RE deal (possibly the very best tax benefit only available in the US)!!

WHAT ELSE AM I MISSING??

@Zach Lemaster It seems you have covered most of it. 

-Ability to set up corporation to pay less taxes (would this be the 7.5 ssn, or are there others), deduct all expenses related to business activities (gas driving to rentals, CPA/Attorney fees, home office possibly, etc.)

You have already mentioned that rental income is taxed at a lower rate due to no self employment tax. A "C" or "S" corporation will not help in that regard for a rental. A C-corp is a terrible way to hold property. You get to deduct all the things you  mentioned whether you have a corporation or not.  

An LLC is not a "Corporation" it is a separate entity which may offer you some liability protection but no real tax advantages over owning in your own name.

@Ned Carey Thanks for the clarification Ned on the legal side.  Do you have recommended CPA or Attorneys to utilize for professional assistance on these topics?

@Zach Lemaster People often ask CPAs for legal advice and Lawyers for tax advice. That is not a good idea, unless the person is both a CPA and lawyer.  In fact they may offer conflicting advice because they come at the issue from different perspectives.  The best entity for legal protection may be the worst for taxation for example.

You definitely should get a local lawyer. My accountant takes on clients out of sate. I highly recommend him. Jeff Stoller of Goodwich Stoller and Associates in Catonsville MD.