4 Tax Advantaged Investing Strategies for Real Estate Investors

by Spencer Cullor on April 15, 2014

Tax Advantaged Investing

Real estate investing can allow an investor to lower their taxable income legally.

4 Tax Advantaged Investing Strategies for Real Estate Investors

Today is tax day.  If you are like millions of Americans you are running to the post office to send a nice check to Uncle Sam based on your income for the year.  If you were one of the lucky many who had to write that check, it probably wasn’t much fun and maybe even a little painful.  Income tax is the single biggest expense most people will pay in their lifetime.  Did you know there are millions of investors out there who pay little to no income taxes on their investments legally?  Next year, why not try to limit the amount of taxes you pay through your investments?

When it comes to investing and taxes, all investments are not created equal.  Real estate is one of the few places you can invest that has some major tax advantages.  Real estate allows many investors to pay zero or greatly reduce their income taxes on the income they receive from their investments.  You can even use real estate to grow your equity while deferring taxes indefinitely.  Best of all, it’s completely legal and encouraged by the IRS.  You won’t find that in a stock on Wall Street.

4 Tax Advantaged Investing Strategies for Real Estate Investors

  1. Depreciation – Depreciation is a paper loss that an investor can apply against their real estate investment income to lower or eliminate their taxable income.
  2. Tax free proceeds from refinancing – When you refinance a property and take cash out of the property, you can take out any refinance proceeds tax free.
  3. 1031 exchanges – 1031 tax deferred exchanges allow you to sell a property that has increased in value and reinvest the gains in a larger property while deferring the taxes indefinitely.
  4. Investing through your IRA – When you invest in real estate through your IRA, the income and appreciation it creates grows tax free until retirement.

Income tax is one of the biggest expenses most people will pay in their lifetime.  You must have a strategy for lowering your income taxes through your investments.  However, not all investments are equal when it comes to the IRS.  Real estate has major advantages when it comes to taxes on your investment income.  You can use these four tax advantaged investing strategies to lower your taxes you pay to Uncle Sam and grow your wealth legally.


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