Tax Benefits Make Landlording a Great Idea

More often than not, Americans accept the ridiculousness of our national tax code as par for the course, shrug, and go on our merry way. There’s nothing to be done about it, right? At least we’re not England, where the usurious rates north of 70% for high earners sent the members of the world’s all-time best selling rock band (The Rolling Stones) scurrying for friendlier financial climates long ago. Granted the tax code in the U.S. isn’t that bad yet but it’s coming.

You owe it to yourself and your family to retain the most profit possible in these turbulent times and – newsflash – Wall Street ain’t where the best deals are found. By the time you pay administrative and transaction fees AND the inflation tax, that 10% return on investment struggles not to slip into negative territory. Though income property investing done the right way is the best defense against inflation, today we’re here to talk about how real estate ownership can help you avoid the bite of traditional taxation, legally, of course.

What tax advantages does a landlord have over the poor sap still stuck in the stock market? Here are a few:

• * Mortgage interest and real estate taxes on rental properties
  
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• * Depreciation on residential buildings over 27.5 years
  
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• * Income from rental properties is exempt from the self-employment tax
  
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• * Deduct standard operating expenses like utilities, insurance, repairs, maintenance, etc
  

One other nice tax advantage you might have heard of is the 1031 Exchange, which allows you to sell properties that have appreciated without getting hit with a federal income tax bill. Sounds crazy but it’s a perfectly legal scheme concocted by your dear Congress and the IRS. The 1031 Exchange rules allow a landlord to sell one property without incurring any taxes as long as you turn around and use the proceeds to buy a “replacement” property of equal or greater value. Savvy investors should immediately recognize the potential for upgrading to a better location or even a higher cash flow building via this strategy.

The bottom line is that no other form of investment can hold a candle to income property investing. If you’ve always wanted to be a landlord and have enough cash for a 20% down payment squirreled away somewhere, what are you waiting for? Despite rumors to the contrary, the real estate business has been and always will be alive and well for those with the sense to take advantage of it. (Top image: Flickr | DonkeyHotey)

The JasonHartman.com Team

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