Have you recently discovered real estate investing to be your passion? Or, have you realized how lucrative it actually is, which is why you’ve started doing it? Whatever the case, one thing is absolutely for sure. There are taxes you won’t be able to avoid. This is what you should know about taxing if you’re planning on becoming an investor.
If you’ve already started your investing journey, then you ought to learn a bit more about the actual taxing process, so as to know how to successfully go through tax season and what to do when it approaches. You’re one of those people who always wait until the last minute to have their taxes sorted out? Certainly not a good idea when it comes to real estate investing, because you could miss out on a lot by doing that.
Miss out on what? Aren’t taxes those amounts of money you need to pay to the taxing authority? Since you know they surely are, you’re wondering what it is that you may miss out on when it comes to this. It’s not like someone is paying something to you.
While it’s not like someone will be paying something to you in this scenario, you can miss out on the opportunity of saving some money. Basically, by planning ahead, you could get some valuable deductions, and thus save both money and time. Thus, taking a more proactive approach here and doing your best to properly plan for the tax season in advance can result in some deductions you’ll love.
Here’s how to minimize the taxes as a real estate investor: https://www.rentecdirect.com/blog/9-strategies-for-minimizing-taxes-when-investing-in-real-estate/
Now, you may already understand how the taxing process works and you may understand which steps to take to plan for all of this. And yet, you may not have any idea as to how to save money on taxes as a real estate investor, which is what we’ll focus on talking about below. Put simply, I’ll share some pieces of tax advice for real estate investors that you absolutely should know if you’re planning on minimizing your taxes.
Hold the Properties Longer
I can see why you would, as an investor, be tempted to sell your property the moment you buy it. Completely normal. That’s basically your job, as you’re not planning on buying all of those properties to keep them. Renting out and selling are your goals, so it’s perfectly normal that you’ll be thinking about selling the moment you actually buy.
And yet, you should wait. For at least a year. Why? So as to save money on taxes. If you sell after having owned the property for less than a year, your profit will be taxed at a normal tax rate. On the other hand, if you own the property for more than a year and then decide to sell it, you will probably be able to sell it at a capital gains tax rate, which could even be half the normal rate.
Of course, you can rent out the property during that first year, and thus still gain a profit.
Maximize Deductions
One of the things that every professional advisor will teach you about real estate investing and taxing is this. Almost every single real estate expense is deductible. By talking to the Advise RE or similar professionals, you’ll get a list of those specific expenses that you could deduct, and the deductions actually lead to minimizing taxes. That’s the main idea here, isn’t it? So, focus on maximizing your deductibles, deducting expenses such as maintenance costs, insurance, closing costs, travel and mileage, home office expenses, advertising expenses etc., so as to minimize taxes.
Have Professionals Make a Custom Strategy for Your Specific Situation
The absolutely best thing to do when aiming at completing the tax filing process successfully and benefiting from those deductibles, saving money in the process of course, is to hire professionals to help you out. Everyone’s situation is different. And, there are experts that can make a custom strategy for your particular situation, designed to help you out specifically. Meaning, the strategies will be tailor-made for you, which is bound to result in you saving money on taxes as a real estate investor.
