Property investing has so many possibilities when it comes to making money. Many people may not be aware though that there are many possibilities to save money as well. I will discuss three tax breaks everyone should be taking advantage of.
Although there could be many different tax benefits to owning a home, there are definitely at least three big ones you must be taking advantage of. I would like to point out that these benefits can be taken advantage of beyond what many people typically think.
Tax break one- Write off your mortgage interest. Everyone knows they have to pay the dreaded mortgage payment, but they often forget about being able to write off the mortgage interest when they are figuring there yearly expenses. The best thing about this benefit is that it can be used in all properties you own. In fact you could write off the mortgage interest on 100 different properties if you wanted to.
Tax break two- Write off property tax. Property tax is similar to mortgage interest in that it is tax deductible. It is also similar that the benefit applies to all properties owned.
Tax break three- A big one that can help if you intend to sell your home. If your property goes up in value it used to be that you had to pay capital gains tax. Other than a few creative strategies the only real way to avoid capital gains was through a tax deferred exchange. The 1031 tax deferred exchange, this was a way you could take the capital gains and use them in the purchase of a more expensive or like-kind property thus deferring the tax liability. Now the law states that you only have to pay capital gains if the property goes up in value over 250,000 or 500,000 if you are married. Any amount over this of course relegates you to the 1031 method.
Property investing has so many benefits beyond just the business, and the tax benefits are practically endless for those willing to research the advantages.