There are many different types of common investment strategies that take into account key elements such as risk, active or passive investments, growth, and a host of other factors. Real estate investors, however, typically follow one or more of the four main property investment strategies: Core, core-plus, value-add, and opportunistic investments.
A 1031 exchange is a way of deferring capital gains taxes on the sale of real estate. Taxpayers who sell property held for investment purposes can defer the taxes by directing the proceeds from the sale into "like-kind" property of the same or greater value, also to be used for investment. In practice, almost any investment property has been considered “like-kind” by the IRS.
While low interest rates are typically thought to be an advantage for buying real estate, more than one factor plays a role in the success of any investment, including REITs, or Real Estate Investment Trusts.
Proper financial planning can help reduce your tax liability. But what exactly is proper financial planning? It looks at the buying and selling of assets with an eye towards tax liability reduction. This involves the timing of selling and buying, and the types of accounts assets may be held in. Let's dig into the details.
The state of Delaware offers potential income tax advantages and has trust-friendly laws for individuals. These benefits aren’t limited to the residents of the state. Non-residents can use the state’s laws to their advantage by creating a trust fund in Delaware. One type of trust to consider opening is a Delaware grantor trust.
Opportunity Zones, commonly referred to as Qualified Opportunity Zones or QOZs, were created by the 2017 Tax Cuts and Jobs Act. Formally known as the Investment in Opportunity Act, the relevant portion of the legislation was included in the TCJA to encourage investment of capital gains into specifically designated, economically challenged areas that could benefit from the infusion of funds. In return for directing their assets into the identified areas, taxpayers could receive tax deferrals and even breaks on their earned gains.
Mortgage financing is a common way for real estate investors to acquire investment properties. Borrowers who derive rental income from investment properties have many important tax breaks available to them.
One aspect of being a real estate investor is to figure out how to operate within the framework of the law while seeking as many tax breaks as possible. For instance, investors can claim the depreciation (the gradual loss of value over time due to natural wear and tear) of a property on their taxes, which can offset some of the profits generated by the property. While there are multiple tax breaks and tax deferral options available to real estate investors, there are still questions that surround the legality of taking advantage of some of these breaks. For instance, investors often wonder if they can claim the interest owed on their investment properties in the same way that they claim interest on the mortgage associated with their primary residence. The answer to that question will come as a great comfort to real estate investors who want to use every allowable tax break to their advantage.
Some real estate investors have long understood the importance of taking advantage of legal tax breaks and tax deferral options. Capital gains taxes, which are owed any time an investor makes a profit from the sale of a property, can lead to a major tax liability that can greatly reduce the profits generated. That’s why we believe it's important that investors consider alternate investment opportunities that are still legal according to the Federal Tax Code. One such example of these legal tax deferral options is a Delaware Statutory Trust. Understanding what these trusts are and how they can provide tax relief is a tool for real estate investors.
When the Tax Cuts and Jobs Act was signed into law back at the end of 2017, it allowed a new tax deduction under Section 199A of the tax code of 20 percent for qualified business income (QBI).
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