Diversifying your investments has always been a smart move. Additionally, you’ve heard that buying rental properties can produce a valuable, recurring cash flow. But, did you know that it also has benefits when tax time comes?
Being able to know the significant tax benefits can help you identify the right strategies and understand how and when to use them.
Read on to learn about the many tax benefits of real estate investing.
Deduct your expenses
One of the biggest financial perks of investing in properties is the real estate investment tax deductions you can take. This means you get to deduct expenses directly tied to the operation, management, and maintenance of the property, which includes property taxes, property insurance, mortgage interest, property management fees, and the cost to maintain and repair the building.
According to real estate experts, you can also write off much of what you pay to run your real estate investment business. Qualified business expenses may include advertising, office space, business equipment, legal and accounting fees, and travel.
These deductions lessen your taxable income, which could help save you money when you file your taxes. However, make sure to keep detailed, accurate records and receipts so you can prove the expenses you claimed in case you are audited.
Depreciate costs over time
As commonly defined, depreciation is the incremental loss of an asset’s value, generally due to assumed wear and tear. If you are a real estate investor that has income-producing rental property, you can deduct depreciation as an expense on your taxes. That means you will be able to lower your taxable income and possibly reduce your tax liability.
Use a pass-through deduction
A pass-through deduction allows you to deduct up to 20% of your qualified business income from your personal taxes. When you own rental property, the money you collect in rent is considered QBI.
By using a pass-through deduction, you can write off up to a maximum of 20% on your personal return. But keep in mind that there are some rules and regulations that must be followed, so it is best to consult with your accountant.
Take advantage of capital gains
According to property experts, a capital gains tax may be assessed when you sell an asset, like a piece of property, for a profit. There are two types of capital gains that may impact your tax situation.
Short-term capital gains
Short-term capital gain is realized when you profit from selling an asset within a year of owning it. Since you may not have a choice but to sell, you have to be aware that in doing so, it can have a negative effect on your taxes since the gain gets counted as regular income.
Long-term capital gains
On the other hand, a long-term capital gain is realized if you profit from the sale of an asset that you have held for a year or longer. If you can wait until the anniversary of your purchase to sell, you will get to keep more money in your pocket and save on tax since the long-term capital gains tax rate is significantly lower than the tax rate on income.
There are various tax perks and deductions that are available to real estate investors, which can lead to tax savings. The reasonable costs of owning, operating, and maintaining a property can be deducted to lower your taxable income. You can take advantage of these benefits and deductions that are available to you as a real estate investor.
Knowing these tax benefits from investing in real estate is important not only in maximizing possible deductions but also in making wise investment decisions as well. When you maximize your tax benefits, you have to make sure to record and maintain as much information on your property and keep track of the property’s estimated market value.
While retaining an experienced and knowledgeable CPA is recommended and will help lessen the stress, it is important for you, as an investor, to have a general understanding of these strategies and benefits and keep a thorough record of your real estate investment-related expenses to make your tax filing a lot easier.
Vista Residences is the condominium arm of the country’s largest homebuilder, Vista Land & Lifescapes, Inc. that offers ready for occupancy and pre-selling condominium projects in Manila, Makati, Mandaluyong, Quezon City, Ortigas, Baguio, Cebu, and CDO that are strategically located within major cities, in close proximity to premium universities, transit-oriented locations, and developed business districts.
At Vista Residences, unit owners can take advantage of the property’s centrality. The properties of Vista Residences are strategically located near the country’s premium universities and CBDs, making them an attractive investment for both local and foreign investors.
Vista Residences has ready for occupancy condo projects in Manila such as Vista Taft, Vista Heights, Vista GL Taft, 878 Espana, and Crown Tower University Belt. It also has pre-selling projects in the said area which include Vista Recto, Plumeria Heights, Tennyson Heights, Bradbury Heights, Sky Arts Manila, and Kizuna Heights.
Meanwhile, its ready for occupancy projects in Quezon City include Wil Tower, the Symphony Towers, Pine Crest, and Vista 309 Katipunan. It also has pre selling condo projects in the said city such as Hawthorne Heights and Vista Pointe.
Living in Vista Residences enables you to enjoy convenience, where everything is pretty much within walking distance or a few minutes away from the property; comfort because the project features and amenities are designed to deliver comfort at all times, which makes condo living a worthy investment; security that is 24/7 and CCTV monitoring, which makes the residents safe and secure within the property.
In line with Vista Residences’ thrust to offer convenience among its residents, it also features an AllDay Convenience Store and Coffee Project in all its projects.
Vista Residences is part of Vista Land’s roster of vertical housing brands that cater to millennials and young professionals. The other vertical brands include Camella Manors, COHO, and Crown Asia.
For more information on Vista Residences, email [email protected], follow @VistaResidencesOfficial on Facebook, Twitter, Instagram, and YouTube, or call the Marketing Office at 0999 886 4262 / 0917 582 5167.
