If you are thinking you are going to be able to invest in property and not pay ANY money to the government in taxes - think again! One way or another you will pay taxes on it, it is just a question of how much.
So, when does a property make sense as an investment? What kind of investment in real estate is needed in order to minimize your taxes? Let us take a look at these issues in this article.
The first thing you must do is get a thorough education in the major ways investment property is taxed.
It is also a good idea to have a basic education on how to calculate property taxes and depreciation values.
Become familiar with all of the pertinent terminology, as well as any tax laws in your state or country.
If you do not have the type of mind that can grasp these concepts, we strongly suggest consulting an accountant with expertise in real estate taxes.
In fact, this is advisable even if you do possess a basic knowledge in this field yourself.
Did you know that income from rental properties receives a better deal as far as taxation goes than earned wages from a job? This is absolutely true! It is not necessary to pay FICA taxes on money earned from rental properties.
Not only that; but when you are getting your annual taxes done, you can legally deduct things like mortgage interest and any repairs you make to your rental property.
NOT EVERYTHING is a deductible expense here, so please consult with your accountant before doing your taxes.
Did you know that real estate can provide you with a tax free stream of cash flow? Yes it will - MOST of the time.
IF your mortgage interest deductions and depreciation is a part of your calculations, most likely you will not have to pay taxes on this income.
There is a capital gains tax involved, but typically that is assessed after the sale of the same property.
In order to find out for sure if these things apply to you, consult your accountant.
With the proper advice from your real estate knowledgeable accountant, you should be able to use tax write-offs from your properties against any other income you earn.
There are specific deductions that are allowed in these types of situations.
If you are currently considering investing in real estate, you should become aware of ALL of the applicable tax laws and regulations in your state or country that you can expect to receive BEFORE investing.
That way everything is done properly and lawfully.
The best advice we can give you on this matter is to do some research and consult with local specially trained experts.
The laws and regulations governing the taxation of real estate are frequently different from region to region.
Only a trained expert will be able to properly advise you on all pertinent details.
Better safe than sorry.