What tax benefits or implications should I be aware of as a real estate investor?

[David Ounanian]

Real estate investors should consider key tax aspects for financial optimization and compliance. Given potential tax law changes, consulting a professional is crucial. General considerations include:

Income Taxes
- Report rental income, distinguishing between short-term and long-term rentals.
- Utilize depreciation deductions to reduce taxable income.
- Understand passive activity loss rules limiting deduction of losses from passive activities.

Capital Gains Taxes
- Be aware of tax implications when selling property, considering short-term and long-term rates.
- Explore strategies like 1031 exchanges to defer capital gains taxes.

Deductions and Expenses
- Know eligible deductions: mortgage interest, property taxes, insurance, maintenance, and management fees.
- Maintain detailed records of all real estate-related expenses.
- Use cost segregation studies to expedite depreciation of your properties to offset large income gains.

Entity Structure
- Choose appropriate legal structure (LLC, partnership, or S corporation) with consideration for different tax implications.

Tax Credits
- Explore available credits, like energy-efficient or historic rehabilitation credits.

Qualified Business Income (QBI) Deduction
- Check eligibility for QBI deduction, providing up to a 20% deduction on qualified business income.

Record Keeping
- Keep accurate and organized records for tax compliance and audits.

State and Local Taxes
- Consider varying state and local tax implications, including property and income tax rates.

Tax Planning
- Engage in proactive tax planning, consulting with professionals for a comprehensive strategy.

Tax Changes
- Stay informed about changes in federal, state, and local tax laws affecting real estate investments.

Remember to consult a real estate tax professional for personalized advice based on your specific situation.

[David Ounanian]

Thanks Julio yes I love cost segregation!