Investing In Real Estate And Your Income Taxes.

In this video we briefly go over some taxation basics in regards to real estate investing. I am meaning to reach out to individuals or entities that purchase homes to buy or rent exclusively. In some cases life changes such as marriage or inheritance can place you in a position to sell or lease a property. However for right now I want to focus on investors and some basic terns they should all know.
1.Rents: This is normally payment that is collected from a government agency or an individual to reside in your property for an agreed upon time. Rents have to be reported to the IRS on your tax return.
2. Allowable Expenses. Expenses can reduce your rents. In turn this could decrease your taxes owes also. However, the expenses have to be tracked and recorded property. Using a digital platform to save expenses are great. Paper receipts and invoices are acceptable methods also. However, most of the time entire bank and credit card statements are ignored during an audit. Find a method to save your receipts from anytransaction you make while in business.
3. Calculating the right type of depreciation and length of period of depreciation. Remember to remind your tax professional if you had depreciation from a prior year. Land is not depreciable. So please make sure that land is not facored in when you or your tax professional prepares your taxes.
4. 1031 Exchange was talked about briefly in our video. This tax filing is normally one that allows you to sell an investment property and defer the capital gain taxes by rolling the gains into a similar property. From there you pay no taxes. You are also allowed to recapture depreciation from the home you sold. However a 1031 has very strict rules and you are on the clock the moment you sell. You have 6 months from date the original property was sold to reap the benefits.

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