Welcome to Real Estate Guide
Real Estate Article
For a permanent link to this article about Real Estate, or to bookmark this page, click here.
Real Estate Tax Incentives
from: Neda Dabestani-RybaReal Estate Tax Incentives
By Neda Dabestani-Ryba
Prudential Carruthers REALTORS
Lower Your Taxes
Tax incentives for real estate investors can often make the difference in your tax rates. Deductions for rental property can often be used to offset wage income. Tax breaks can often enable investors to turn a loss into a profit.
For which items can investors get tax breaks? You could claim deductions for actual costs you incur for financing, managing and operating the rental property. This includes mortgage interest payments, real estate taxes, insurance, maintenance, repairs, property management fees, travel, advertising, and utilities (assuming the tenant doesn't pay them). These expenses can be subtracted from your adjusted gross income when determining your personal income taxes. Of course, these deductions cannot exceed the amount of real estate income you receive. In addition to deductions for operating costs, you can also receive breaks for depreciation. Buildings naturally deteriorate over time, and these "losses" can be deducted regardless of the actual market value of the property. Because depreciation is a non-cash expense -- you are not actually spending any money -- the tax code can get a bit tricky. For more information about depreciation and various tax alternatives, ask your tax advisor about Section 1031 of the U.S. Tax Code.
Have a Positive Cash Flow
There are two kinds of positive cash flows: pre-tax and after-tax. A pre-tax positive cash flow occurs when income received is greater than expenses incurred. This sort of situation is difficult to find, but they are usually a strong and safe investment. An after-tax positive cash flow may have expenses that outweigh collected income, but various tax breaks allow for a positive cash flow. This is more common, but it is generally not as strong or safe as a pre-tax positive cash flow.
Regardless of what kind of real estate you choose to invest in, timely collections from your tenants is absolutely necessary. A positive cash flow -- whether it be pre-tax or after-tax -- requires rental income. Be sure to find quality tenants; a thorough credit and employment check is probably a good idea.
Use Leverage
One of the most important factors in determining a solid investment is the amount of equity you are purchasing. Equity is the difference between the actual worth of the property and the balanced owed on the mortgage.
Benefit from Growing Equity
While investing in real estate is relatively complex, it is often worth the extra work. When compared to other financial investments, like bonds or CD's, the return on investment for real estate purchases can often be greater.
The key to real estate investing is equity. Determine an amount of equity that you want to achieve. When you reach your goal, it's time to sell or refinance. Determining the proper amount of equity may require the assistance of a real estate professional.
About the Author
Neda Dabestani-Ryba is a licensed Realtor in Maryland. She is a member of the President's Circle of Top Real Estate Professionals. She can be reached at (800) 536-3806 or visit her website for more information: http://neda.dabestani.pcragent.com/
Prudential Carruthers REALTORS is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity
Real Estate Specific links
Real Estate News
Real estate goes through roof in China (UPI)
BEIJING, July 3 (UPI) -- Real estate prices in major cities in China have suddenly gone from bust to boom, a leading real estate expert said.
Read more...More Real Estate Buyers Choose Smaller Spaces (NY1 News)
Real estate firms have released their second quarter market reports, and shown that prices continue to fall while activity has increased. NY1's Real Estate reporter Jill Urban filed the following report.
Read more...Real estate sales booming in Vancouver and Victoria areas (CBC British Columbia)
Historically low interest rates and discounted housing prices are fuelling a real estate boom on B.C.'s south coast with sales in Vancouver up 75 per cent compared to June of last year.
Read more...Infrastructure, real estate sectors expect a big boost (The Hindu)
NEW DELHI: The infrastructure sector and the recession-hit real estate sector are looking forward to the Union budget with great expectations. Both the sectors, which require huge investments, are expecting a big boost to revive growth and put ...
Read more...Japan's Real Estate Trusts Rise from the Abyss (BusinessWeek)
Japan's 40 real estate investment trusts (Reits) are slowly and painfully recovering from their worst experience since they were introduced in 2001. However, some analysts still see major structural problems in the industry.
Read more...