Note that the tax benefits are a bonus, not a reason to buy a property. The idea is to make the money first and then save taxes on the income you receive.
How many of you would agree that the biggest expense you have in your life what are the taxes? Real estate can help you avoid taxes legally. There is a big difference between the escape and tax evasion. We just want to take advantage of gaps in the tax "law that Congress allows us to take, because since the foundation United States, laws have encouraged landowners. Today, the tax laws still contain "loopholes" for investors property. Congress gives you all sorts of financial reasons to invest in real estate.
When you look earned income, such wages from your job, you might be paying taxes on 50% of that income, not counting federal, state and FICA (Social Security and Medicare). If you sell a property you have owned for a year or more, the benefit is considered income investment and you only pay gains long term capital tax on it, which is currently at 15%, which is a much better rate of 50%! If you own property as a rental property and you set your real estate correctly, the cash flow is considered passive income and you pay no tax whatsoever.
You can do even better than the rate of capital gains if, instead of selling, you simply have a cash-out refinance. The income is tax free! When you figure in taxes and selling, you could do better by re-financing with no money in your pocket if you just sold, the more you are still owns the property and continue to receive income on that!
Depreciation is one of the largest tax benefits to all. Even if the property appreciates, Congress allows you to take a deduction for depreciation, implying that it drops in value. For example, you may have a property that generates $ 15,000 annually in rental income and expenses that the property is $ 8,000 per year. This leaves you with a profit before tax of $ 7,000. However, you may have a depreciation charge for 8000 $, Using graphics from the IRS. Rather than having to pay tax on earnings $ 7,000, your net income after depreciation deduction would be negative $ 2000! In reality, you make a $ 7000 profit is yours to keep, but as far as the IRS is concerned, you made a loss of $ 2,000. This is known as a "waste of paper." This "deduction miracle to stop you just to pay taxes on your property, but can offset income from other sources, such as income from your job, as you follow certain IRS qualifications.
I call you blessed!
Billy O'Neal
About the Author:
Billy O’Neal is a Real Estate Investing Coach with a passion for helping others reach their potential. Billy’s latest venture, Sell2Day.com is a Real Estate Investor Network that maximizes marketing and creates new streams of income for investors. For more info go to http://www.sell2dayaffiliates.com Get the #1 Real Estate Investing Home Study System today at: http://www.RighteouslyRich.com
Article Source: ArticlesBase.com – The Tax Benefits of Real Estate Investing
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