Paying Rental income tax? Or ways to avoid it legally?

Question

For multifamily and comercial rentals,

1. Is it better to pay income tax or not? If so, why?

2. Is there any way to avoid paying rental income tax legally? If so, how?

Michael Plaks · Answer

1. Better to pay. It means that your cash flow is so great that you cannot offset it with tax strategies.

2. Yes, but it is case-by-case. Usually a thorough exploitation of depreciation with cost segregation, partial dispositions, various exceptions in Tangible Property Regulations etc. This is not DIY stuff, it requires professional help.

Basit Siddiqi · Answer

Given the current environment of high prices and high interest rates, it is not likely that a taxpayer will pay tax on rental income for properties purchased now.

Julio Gonzalez · Answer

As Michael mentioned, there are multiple strategies that you could potentially benefit from but it's totally dependent on the tax payer and their portfolio. A cost segregation study may be beneficial to help reduce your current taxes. Here's an article with additional FAQs on cost segregation studies that you may find helpful. Feel free to reach out if you have any questions!

https://www.biggerpockets.com/forums/51/topics/1113749-cost-segregation-faq

Jonathan Bock · Answer

@Amanuel Gebrelibanos

Would you rather pay $0 in tax or $10MM in tax?

Paying Rental income tax? Or ways to avoid it legally?

Paying Rental income tax? Or ways to avoid it legally?

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