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10 Real Estate Tax Strategies For U.S. Investors


Taxing Profits from a Real Estate Investment

For income from operation, there are two sources of tax:

  • Ordinary income tax
  • Minimum tax on preference income from operation

To get an accurate due tax figure, the real estate investor has to estimate their taxable income and the marginal tax rate for each year of operation.

For income from sales, there are three sources of tax:

  • Income tax
  • Capital gains tax
  • Minimum tax

Classification of a Real Estate Investments for Tax Purposes

Real estate investments are classified into four categories for tax purposes. These are properties held for:

  • Personal residence
  • Sale to customers
  • Use in business and trade
  • Investment

Generally, most real estate investments, under the tax code are seen as held for use in business or trade, rather than investment.

It’s important to classify your real estate because this way you can control the tax influence on your investment. Here’s an example. If you bought a property for personal residence, then any living costs and maintenance expenses will not be deductible. You will also be unable to deduct a depreciation allowance. If you sold that property and incurred a loss, then you won’t be able to deduct it, but if you made a profit on the sale, then that would be taxed either as short or long-term capital gain. All these deductions would be available if your real estate is classified as held for use in business or trade, or for investment.

Tax Shelters for Real Estate Investments

We often talk about tax planning because its primary aim is to minimize the amount of tax you pay, therefore maximizing your wealth.

In real estate investments you can take advantage of these three tax shelters (even though some limitations apply):

  • Tax deferral
  • Tax leverage
  • Conversion of ordinary income into capital gain at the time of sale

It is essential to build a smart and sustainable tax planning strategy when you are investing in real estate. This will ensure that the value of your investment is as high as possible. Do you know how to use these tax shelters to your advantage? FAS CPA & Consultants can help you craft the right tax plan for your investment activity.

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Real estate is a profitable and exciting business that should be planned and managed to maximize tax benefits. There are few considerations to remember when you start your real estate business, you will find a list of them in this guide.

Company Structure

The ideal is an LLC or limited liability company. LLCs are not subject to income tax and give many tax advantages as company structure.

ITIN for Foreign Investors

If you are a foreign investor, you need to get an ITIN or an individual tax identification number to report your profits to the IRS.

Tax Reduction and Deferral Strategies

There are several tax strategies that help you reduce your taxes legally:

    • Shifting income
    • SEP IRA
    • Defined Benefit Plan
    • Self Directed IRA
    • Solo 401K or Defined Contribution Plan

There are many real estate strategies designed to help you reduce your tax bill. Many of them are very sophisticated and involve proper planning:

  • Acquisitions and Dispositions of Partnership and LLC Interests
  • Section 1031 Like-Kind Exchanges (including forward, reverse, and exchanges involving tenant-in-common interests)
  • Tax-Deferred Installment Sales
  • Conservation Easements and Charitable Trusts Tax-Free
  • Partnership Liquidations Spinoffs and Partnership Divisions
  • Tax Deferral Techniques
  • Capital Gains Tax Planning
  • Asset Protection Planning for Real Estate
  • Depreciation Recapture Minimization Planning Tax-Free
  • Partnership Exit Strategies

These considerations can make a big difference in your tax bill. Take away the worry and plan to enjoy the benefits and tax savings.

As a Real Estate Investor, your mind and heart are always on your Investment. We offer you the tools to reach your goals and grow your investment.

  • File your taxes always on time, never on extension: Automation of your entire tax filing on time, avoiding IRS interest and penalties for late filing.
  • Peace of Mind: Our tax plan is designed to release you from worries and stress so you can experience a sense of happiness and freedom in your business.
  • Financial Statements 24/7: Balance sheet, income statement, and cash flow statement
  • Control your finances in the palm of your hand.

FAS CPA & CONSULTANTS offers you the strategies you need to optimize your earnings and reduce your tax payment costs. Check out our Tax Planning For U.S. Real Estate Investors Designed to provide you solutions to any situation, leave your tax strategy in the hands of our experts

How to Find a Good Tax Accountant for Real Estate Investment

It is important to have a good and close relationship with your tax accountant. When you begin your search you should look for someone who:

  • Has the relevant qualifications.
  • Has proven experience in real estate investment.
  • Has good reputation, confirmed by past or current clients.
  • Is trustworthy.
  • Is not willing to break the law, but can maneuver legally.

Check Our Video Presentation Tax Planning For U.S. Real Estate Investors

Click The Link below and Check Our Taxclass for U.S. Real Estate Investors - How to Select the Best Entity Type for RE

Email Us Support@fascpaconsultants.com and Get A Complimentary Tax Review Today

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Gala Cedeño

Thanks to FAS & CPA Consultants and Fulton Abraham Sanchez, CPA, I was able to resolve a debt of $479,677.71 that I had with the IRS.

Carlos Lange

My experience with FAS CPA & Consultants has been incredible, their professionalism is impeccable. I highly recommend them.

David Barcelo

I highly recommend FAS CPA & Consultants, they are responsible, efficient and very dedicated.

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