What Can Offset Depreciation Recapture?
Depreciation can be an extremely favorable and advantageous tax benefit for real estate investors. Depreciation is a tax deduction that allows property owners to lower the costs associated with purchasing and making improvements to income-producing properties. This deduction lowers the amount of taxable income (but not cash flow) generated from rental properties.
At What Rate is Boot Taxed in a 1031 Exchange?
When an investor earns a profit through selling an asset, the IRS taxes the income as a capital gain. If the owner held the investment for less than a year before selling, the growth is classified as short-term, and the tax rate is the same as that taxpayer’s ordinary income. Depending on the individual’s income level, that tax rate may be as high as 37 percent.
What is Distributable Net Income (DNI) and How Do You Calculate It?
Most trusts eventually distribute their assets to beneficiaries. Whether taxes are owed on those distributions depends on a number of factors. Distributable net income is one of those factors. It can also help in reducing a trust’s tax bill.
What is Title Vesting?
For many people, buying a home or an investment property is the culmination of years of dreaming, hard work, and saving. Purchasing real property comes with some important decisions, most notably, how to hold the title for the residence or asset. This decision, known as title vesting, affects the legal rights of the property owners, as well as directs the flow of payments if the asset is sold.
Are There Tax Advantages to Owning Rental Property?
Direct real estate investments have a few tax advantages that passive real estate investing doesn’t. Of course, direct real estate means more work. Passive real estate investing is just that, passive and mainly hands-off, except for some managing of the investment. Passive investors don’t have to deal with tenants or repair buildings.
Can an LLC Member Serve as a Qualified Intermediary?
Real estate investors who complete like-kind exchanges to defer capital gains taxes on the sale of highly appreciated assets have to follow a stringent set of rules set forth by the Internal Revenue Service. Foremost among those regulations is the use of a Qualified Intermediary (QI) to facilitate all aspects of the 1031 exchange.
Does a Credit Shelter Trust Get a Step-Up in Basis?
A common tax strategy for married couples who have amassed significant financial assets is to create a credit shelter trust (CST) in order to maximize the federal estate tax exemption.
When is an Estate Tax Return Required?
When someone dies, their estate is a distinct legal entity for tax purposes. As a result, estates can be required to pay estate and income taxes. The threshold for federal estate taxes is quite high--$12.92 million for an individual in 2023. If one partner in a married couple dies, their exemption transfers to the surviving spouse, effectively doubling the threshold. That amount includes lifetime gift tax exemptions the individual has previously claimed (the annual gift tax exemption is $17,000 starting in 2023).
What is a Private Letter Ruling?
Filing tax returns can be a complicated and messy process, especially for real property owners, 1031 exchangors, or business owners who may not fully understand the various tax codes that affect their returns.
What is a Generation-Skipping Trust?
Establishing a trust can be a crucial part of estate planning for very wealthy taxpayers. Federal estate taxes can take a significant chunk out of an inheritance each time the assets change hands. However, both the rate on estates and the threshold for imposition change according to the political environment. For example, the 2017 Tax Cuts and Jobs Act increased the minimum amount for an estate to trigger the tax and indexed the amount for inflation.
