Prior to your investment in the real estate industry, it’s vital to know the ins and outs of the business. This is because of the several tax benefits that you can enjoy, especially in commercial real estate. The knowledge you have about tax benefits will to a larger extent, determine the direction your investment will take. Understanding all the tax benefits you can enjoy as a real estate investor can be overwhelming. So, here are the commonly used tax benefits in the real estate industry.
You should understand that, like other structures, commercial real estate properties undergo wear and tear as time goes by. Due to this possibility, as an investor, the IRS allows you to claim depreciation as a tax deduction. As a real estate investor, the tax benefit enables you to recover some of the expenses resulting from the repair and maintenance work on the properties. When calculating the depreciation, the basis is on the total cost of the property.
Tax Deductible Non-Mortgage Expenses
When it comes to maintaining a commercial real estate property, you have to be ready to spend a lot of money. This is due to the related costs and amount of work. You should understand expenses associated with the maintenance and upkeep such as repair, renovations, upgrades, and management expenses are deductible. You should, however, find out if you are eligible for these expenses for you to take advantage of the tax benefits.
Deductibility of Loan Interest
The other deductible expense you should know as a commercial real estate investor is the mortgage loan interest. This is the amount of loan interest that you pay annually and a subtraction from the total rental income you receive for a year. It helps determine your taxable income as an investor or property owner.
Lower Capital Gains Tax Rate
If you are planning to retire as a commercial real estate investor, there is a lower capital gains tax rate that you can benefit from. This means you get taxed at a lower rate from the sale of your commercial property. You should also consider investing in commercial properties early and maximize the gains when you retire. Investing in real estate dictates you gain knowledge and understanding of different things about your properties, including tax benefits. Knowing about tax benefits makes it possible to gain more as an investor. For more information about tax benefits in commercial properties, contact Emerald Valley Financial Services and meet your goals.