What tax benefits can high income earner get from real estate?

[Jeff Lulek]

I have always been curious how how significant my tax benefits can be from the purchase of real estate. 

So a little background info on me so you understand why I ask the question.... I am a current multi-unit restauraunt owner who has been in business just under 3 years. I am very blessed my business have been successful which has allowed me a significant 6 figure income, however all my write- offs for depreciation and equipment purchases will not last much longer. This is especially true since I was only able to lease not purchase the buildings.

I have seen my father who is a physician working 100 hours a week pay 50% of his taxes his entire life. While he was very dedicated about investing in the stock market he never knew how to or had the inclination to invest in real estate. A decision which I believe cost him enormous amounts of money over the course of his career. 

Now that I am in his tax bracket(which I never thought would happen) and still in my 30s, I REALLY do not want to see half my income gone each year. I have seen FIRST HAND the amazing tax advantages I received (thanks to my accountant) throughout the first 3 years of my business from depreciation, equipment purchases, etc so I see how powerful it is . Since I do not plan to purchase restaurants for the rest of my life I believe rental income real estate is an excellent alternative. 

So now that you know about about me...Is there any high income earners out there in similar situation to me that can tell me how significant the tax advantages are for them to owning rental real estate? Are they immediate or do they take a while to see the benefits? Even if your not in my situation any professional advise about what types of properties to purchase to start, tax strategies, pitfalls, or ANY sage advice to minimized the dreaded tax bills would be greatly appreciated!! 

Thank you !

Jeff

[Paul Allen]

Welcome to Bigger Pockets!

Any answer to your question that could be typed into a forum post would be incomplete. This is a huge topic! Many books are written about it. Here are a few suggestions/tidbits/points to ponder to guide your further research.

Avoiding taxes is a worthwhile goal, but pursuing an investment only for the tax benefits is usually a recipe for unhappiness. 

How did you plan to invest in real estate? Were you planning to buy residential or commercial property and rent it? Are you looking to buy property, rehab it, and then resell it for a profit? There are different tax implications for those different ways to invest.

You may want to consider reading the Bigger Pockets Book Tax Strategies for the Savvy Real Estate Investor for some ideas. Then go see a tax professional who is knowledgeable in real estate investing and talk about strategies you are considering to see how they fit into your specific situation. Everyone's situation is unique, insist on unique recommendations for yours.

Best of Luck with Your Real Estate Investing!