Tax minimization: Business vs Real Estate ownership

[Ashan D]

Hi,

I've heard that real estate is a decent tax shelter because it allows for a lot a tax write-offs: mortgage interest deduction, building depreciation, deferring capital gains through 1031 exchanges etc.

I'm less knowledgeable about small business taxes. If anyone owns a small business, would you consider your business to have tax-shielding benefits as well? How do the tax benefits of the business compare to your RE assets?

Thanks

[Rich Weese]

Tough question Ashan.
I've always had both, but for different reasons. IMO, EVERYONE should own a business, even if it is secondary to a regular job. It is an excellent method to convert regular EXPENSES into taxable DEDUCTIONS. Without a business, you can't use a lot of these expenses as write off.

Real estate is the the main way to create wealth. I"ve never found anything else where a SCHMUCK (lender) will loan you the funds to buy real estate and another SCHMUCK (tenant) will make the payments for you. Years down the road, you'll own real estate worth X amount of dollars free and clear. Do this enough times and you'll be well set up.

They are both important and both very neccessary to create wealth more rapidly. Good luck. Rich