How does owning property help with taxes?
Do any of you have prior experience on owning a property? We're excited to hear about your most inspiring experiences!
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cmon guys let's get inspired!!
For personal home ownership you can deduct up to $10k in SALT (state and local taxes) paid on the property.
For investment properties you can deduct all legitimate expenses.
To add on this,
For your primary residence you can get a tax deduction against your taxable income. Another big one is the section 121 homeowners exclusion. You can avoid paying taxes on up to $500K of gain (250K if single) if you lived in the property for 2 years and has a 5 year look back period. Which you can use in conjunction with a 1031 exchange and defer anything in excess of the 500k/350k.
For investments you can write off 100% of interest against rental income.
Also for rental properties, you can take depreciation expense to offset any rental income.
You can also defer paying taxes and depreciation recapture, if you 1031 exchange into another property. Could potentially avoid paying any taxes at all if you die.
In practice,
Imagine doing a bridge deal with higher leverage. Short term cash flows are either 0 or negative since DSCR <=1 plus you can factor in depreciation offset with CapEx. By the time renovation and leasing is complete, you have accumulated a massive tax loss in operating income however your property gained a large amount of value (which isn't realized). If you were to sell, you would normally have to pay capital gains however in CRE you could just do a 1031 exchange and defer the cap gains whereby leaving you with a tax loss.
• The main tax benefit of owning a house is that the imputed rental income homeowners receive is not taxed.
• It is a form of income that is not taxed.
Is this a troll account? Why are you always excited to hear about our most inspiring experiences? And why do your questions always sound like they're coming from a 12 year old who found their dad's RE text and can't read past the chapter titles?
mike47946 and ryanlin479 both work for Enriched Data, and are spamming this forum to promote their business.
I think you've done more for "ED", than they have cause I actually looked up the website when you said the name.
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