Helping Women Make Smart Investment Decisions
Ways to Use Real Estate to Lower Your Taxable Income
How can I use real estate to lower my taxable income?
There are several ways that real estate investments can be used to lower your taxable income:
- Deduct mortgage interest and property taxes
If you own a rental property or a second home, you can deduct the mortgage interest and property taxes you pay on your tax return.
If you own a rental property, you can claim depreciation on the building and any improvements you make to it. This can provide a significant tax break, as it allows you to offset your rental income with a non-cash expense.
- 1031 exchange
If you sell a rental property that has appreciated in value, you will typically owe capital gains taxes on the sale. However, if you use the proceeds to purchase a similar property through a 1031 exchange, you may be able to defer paying those taxes until you sell the replacement property.
- Passive income
If you own rental properties that generate passive income, you may be able to claim a deduction for losses related to those properties on your tax return. This can reduce your taxable income and potentially result in a tax refund.
It’s important to note that the tax benefits of real estate investing can vary depending on your individual circumstances and the specifics of the investment. Always consult with a financial advisor or tax professional to determine how real estate investments will impact your taxable income.