5 Real Estate Tax Secrets for Investment Properties

Most people have never heard of these tax strategies that involve an investment home. These tips will help you maximize your tax savings, and will give insight as to how to manage having a second home.

Tip #1: Take advantage of ‘safe harbors’

Don’t let your second home sit vacantly while you’re not there, rent it out! This will provide an extra income, and you can deduct related expenses such as repairs, insurance, real estate taxes, and a mortgage interest. The IRS also has a “safe harbor” policy for rental property expenses for $2,500.

However, if you are personally using the property for more than 14 days per year, there will be different tax implications, so consult with an accountant to determine what the specifics would be.

Tip #2: Depreciate your rental property

The IRS views a rental property as a business expense, which means they expect it to depreciate over time. The benefit of this is that you can deduct some of the cost of the home for upward of 27.5 years.

Tip #3: Depreciate is actually a ‘phantom deduction’

The IRS defines depreciation losses for rental properties as an allowance given to owners for the wear and tear and normal use of the property. While the IRS compensates landlords and owners for the depreciation of their assets, homes actually appreciate in value, so the loss the IRS allows doesn’t happen. This saves money on taxes, while still making a profit.

Tip #4: The 1031 exchange

This tax rule lets people sell an investment property for a profit, while moving the proceeds directly to another investment property, while deferring the tax liability. By paying capital gains tax, this can increase the value of your holdings without affecting your capital. Also, if the money in holding remains untouched before closing, the original sale will have no tax due.

Tip #5: Leave more money to your heirs

If using the 1031, heirs are left with real estate that has a lower tax basis than its actual value, because the tax law states that when someone passes away, the gain inherent in their investment is gone. If you’re looking to get cash out of the property, just refinance it and take out a home equity line of credit. Also, there is no tax on debt so having a home equity line of credit is simple for getting cash flowing without having an extra tax expense.

 

 

 


 

Heidenry, Margaret. “Shh! 5 Real Estate Tax Secrets the Rich Don’t Want You to Know.” Realtor.com, 14 Mar. 2017. Web. 30 Mar. 2017.

The Atlantic City and County Board of Realtors American Red Cross Blood Drive

Soleil Sotheby’s International Realty encourages those who are willing and able to please consider donating blood. “As you may be aware, the Northeast has gotten hammered by the winter storm and this is causing such as huge impact to our collections for our hospitals and more importantly; our patients!  As of this morning, the East […]

NJ REALTORS® Circle of Excellence Sales Award Recipients

Soleil Sotheby’s International Realty is proud to announce our agents who have received this distinguished sales award! The 2016 award levels are: Platinum: $20 million and 30 units minimum, or 125 units Gold: $12 million and 25 units minimum, or 90 units Silver: $6.5 million and 20 units minimum, or 70 units Bronze: $2.5 million […]

Why Winter Is a Great Time to House-Hunt

  Bears hibernate during winter, and there is a common misconception that the housing market goes into hibernation during the winter months as well. This couldn’t be further from the truth. We have amazing Jersey Shore real estate listings that our agents would love to show you. And the Jersey Shore beaches are beautiful this […]

What Was Jersey Shore Real Estate Like in 2016?

One of the most common questions our realtors get is about how the local housing market looks. Knowing the year-to-year comparison can be invaluable for both potential buyers and sellers as they determine when to buy and sell and for how much. This is why we created our Shore Report to provide the general public […]

Five Tips for Relocating to the Jersey Shore from a Different State

    If you have fallen in love with one of the many beautiful homes in Atlantic City, Ventnor City, or Longport, you are not alone. Many people who come from New York, Pennsylvania, Delaware, and elsewhere in the United States and across the world love the area so much that they eventually decide to […]

How Much Did David Bowie’s Art Collection Sell for at Sotheby’s?

    Even in death, David Bowie is setting records. Two months ago, a majority of David Bowie’s art collection went up for auction in London at Sotheby’s, one of the world’s largest and most famous auction houses. Sotheby’s specializes in fine and decorative art, which made it the perfect auction house to handle the […]