MOST REAL ESTATE INVESTORS MISS 3 TAX-SAVING STRATEGIES Investing in real estate is a phenomenal way to build wealth. Real estate is a tangible asset that can offer stable cash flow, long-term appreciation and opportunities to leverage equity. And one of my favorite things about real estate is that the government offers incentives that can legally and permanently reduce your taxes. As a CPA and financial educator, I often see even experienced investors leaving money on the table. Here are three tax-saving strategies most real estate investors miss:
ALWAYS USE COST SEGREGATION AND BONUS DEPRECIATION 1
In my work with real estate investors, I am frequently shocked by the number of people who avoid cost segregation analysis because they think it is somehow an “aggressive” tax strategy that will get them flagged by the IRS. Nothing could be further from the truth. Here’s why cost segregation is so powerful as part of your tax strategy: Typically, residential rental property is depreciated over 27.5 years. That means you only get an annual tax deduction equal to about 3.6% of the building’s cost. Your apartment buildings, however, are far more than just the apartment building structure; they also include interior fixtures and exterior amenities. Personal property and land improvements are depreciated on a shorter timeline than the building
itself, accelerating the rate at which you can write off these costs. In 2022, you can write off 100% of these costs the day you place the property into service. Cost segregation is what allows you to properly (and quickly) depreciate your investment. Word of warning: This is the last year for 100% bonus depreciation, so plan accordingly! It drops to 80% in 2023 and 60% in 2024.
THIS IS THE LAST YEAR FOR 100% BONUS DEPRECIATION, SO PLAN ACCORDINGLY!
Powered by FlippingBook