In commercial property investing, there are numerous types of leases with different expense structures. Though not typical, the simplest is a gross lease, in which the tenant pays a base rent, and the owner is responsible for managing all other expenses, including taxes, insurance, maintenance, and repairs. Net leases are more popular than gross, with subtypes single net, double net, triple net, and absolute. Generally speaking, a net lease assigns the following expenses to the tenant:
A SERP retirement plan, or supplement executive retirement plan, is a non-qualified deferred compensation retirement plan offered by companies in addition to the company standard retirement plan to highly paid employees. Because standard retirement plans such as the 401(k) have limited annual contributions, SERP retirement plans are used to reward top executives with supplemental retirement contributions.
When a foreign national sells real property in the United States, the IRS must somehow collect taxes on any gain. However, the seller may not file a U.S. tax return, which means the IRS will need a different avenue for collecting taxes. That’s where FIRPTA comes.
Interest Deductions, Capital Expenditures, Depreciation, And Other Tax-Oriented Facets of Real Estate Investing
As a property owner, you may be looking for ways to balance some of your real estate related income with deductions. How can you minimize the bite that taxes take out of your earnings? Consult your tax advisor to ensure that you are claiming all the deductions to which you are entitled. Here are some to look out for.
Limited liability companies (LLCs) have been a preferred business entity among multiple stakeholders since the 1980s.
Many legacy Limited Liability Corporations were formed by family members to pool funds to invest in commercial real estate. Perhaps the most famous example is Walton Enterprises LLC, the Limited Liability Company founded to serve the beneficiaries of Walmart founders Sam and Helen Walton. Most family trusts and business partnerships won’t reach those same lofty heights, but they still remain a useful tool for members to make larger capital investments than they could as solo investors.
Just about anyone familiar with the Qualified Opportunity Zone (QOZ) program understands the basics of how it operates. The initiative, part of the Tax Cuts and Jobs Act of 2017, led to the designation of approximately 8,700 federally designated lower-income census tracts -- opportunity zones. In order to stimulate economic development in these zones, investors funnel their capital gains into Qualified Opportunity Funds (QOFs).
Capital gains taxes are applied to any proceeds derived from your real property investments. How much you’ll owe depends on how long you held the asset before selling and your income tax bracket for the tax year.
Closing costs are a part of almost every real estate transaction. The key questions we hear from clients are:
- What are closing costs?
- Who pays them?
- How much are they?
There is no quick and easy answer because there are many variables that go into determining closing costs. It all depends on the type of loan, property cost, and location of the property. Each specific transaction will vary on who pays closing costs and exactly what they will be.
When you open a brokerage account to trade stocks, the account must first be funded before any stock trades occur. The broker uses a separate entity called a custodian to hold your cash. As trades are opened and closed, cash moves in and out of the custodian account.
For investors intent on benefitting from the substantial advantages available through strategic employment of Section 1031 of the Internal Revenue Code, timing is critical. The foundation of the 1031 exchange is the concept that when an investor uses the proceeds of a property sale to purchase another property, the investor is, in effect, continuing the investment. Because the taxpayer is reinvesting all the profits, the IRS doesn't require payment of taxes on cash the taxpayer didn't receive. The investor should be aware that the tax is deferred, not eradicated. That means that if the taxpayer later sells a property without exchanging it for another qualified “like-kind” investment as a replacement, they will owe taxes on the accumulated gains.