Under the current income tax code, unlike many other investments, the income derived from rental real estate can be sheltered substantially to diminish the income tax liability and thus enhance the bottom-line return.
After all income from a rental property is accumulated for the year, the expenses incurred to develop this income may be deducted, effectively sheltering this amount from income taxes. These expenses include all operation costs, such as management fees, property taxes, utility expenses, repairs, maintenance, advertising, bookkeeping, and others, as required. In addition, the interest paid on existing real estate loans is deductible, as are allowable amounts of depreciation; thus, the gross income derived from rentals is effectively reduced to a net amount that is then subject to the imposition of income taxes at the taxpayer’s bracket.
In addition, real estate tax investments are normally made for extended periods of time and, as such, enjoy the tax limitations available under long-term capital gains when the investment is sold for a profit.
To learn more about how to take advantage of these benefit's, please schedule a brief call with our team here: 10 Minute Meeting - Frank Tomlinson
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