To take advantage of all of the investment properties tax savings, you'll want to learn all you can on your own and work closely with a tax professional. There are tax benefits for as long as you hold investment property. When you sell for a profit, however, be prepared to pay taxes on the capital gains.



Most of the tax incentives for real estate investing are in the form of deductions. Maintenance expenses, insurance premiums, property taxes, and mortgage loan interest can all be deducted. To make sure that you don't miss any deductions, go over your records with your tax professional.

Depreciation of your property is one of the advantages of buying investment property. Land does not depreciate, but investment properties and the personal property used with them do. You can calculate the depreciation of either commercial or residential investment property. Commercial properties depreciate evenly over a period of thirty-nine years while residential investments depreciate evenly over a period of twenty-seven and a half years.

Although depreciation is a great benefit, some of this depreciation is recaptured when you sell the property. The fastest way to find out how much money will be taxed is to use an online capitals gains calculator designed for real estate.

When you sell your investment property, youll figure out your capital gains, if any. Your capital gain is the difference between the price that you sold the home for and the book value of your home (which has, on paper, depreciated over the years). Whatever you deducted from your taxes as depreciation will be taxed at the recapture rate of 25%. The rest will be taxed at the capital gains tax rate.

If you qualify as a real estate professional, you can benefit from even more investment properties tax deductions. To qualify as a real estate professional is not difficult. The main requirement is that at least half of your working hours, or 750 hours a year, must be spent doing activities related to real estate.

To qualify as a real estate professional, you need to be materially involved in your investment properties. While you can hire managers to take care of the daily work, you must do the important things like set the rental rate. Learn as much as you can about investment properties tax benefits to get the most savings. Always consult a tax professional for your specific needs.