Buying an investment property - is it a business expense?

[Emily T.]

My unrelated personal business has taken off and I may be looking at making $500k this year. I own no real estate. I've never made this much money or even close. I need to get rid of some of this cash so I'm not paying cray cray taxes.

Can I purchase an investment property, like a small apartment complex, and do it through my business, using the purchase price as a business expense?

So, make 500k, buy 400k apartment complex, only pay taxes on 100k.

My tax person is saying no. Bummer.

If not, other advice?

[Brandon Hall]

@Emily T. said (if you buy residential or small multi-family).

There are, however, creative ways to shelter income if you were to buy real estate with your earnings. For instance, you can buy a strip mall and your business can lease a spot in the strip mall. Lease expenses will be deductible to your business and income to the strip mall. If done correctly, your strip mall will be able to shelter the majority of the income it receives, thereby limiting your overall tax liability. Of course this is a very basic example and one of many options available to you.

Generally, you will want to keep your business and real estate in separate entities. You wouldn't want your business to expose your real estate to liability and vice versa. Make sure the professionals you are seeking advice from have your best interest in mind and are capable of providing the level of service you need.