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If you have REAL ESTATE investments, you are probably MISSING this tax savings.
Everyone likes the tax benefits of real estate, but few talk about this huge one that is more relevant NOW than EVER.
Everyone likes the tax benefits of real estate, but few talk about this huge one that is more relevant NOW than EVER.
For tax purposes, real estate costs are deducted over the useful life of the property.
All that means is it you buy a $1M property, you don’t get $1M deduction the year you buy. You take it over 25-40 years depending on property type and jurisdiction.
All that means is it you buy a $1M property, you don’t get $1M deduction the year you buy. You take it over 25-40 years depending on property type and jurisdiction.
If you think about in terms of net present value, you will eventually deduct the full $1M, but it’s spread out for decades, hugely diminishing the tax benefit.
Nearly all other assets are deducted faster than real estate.
Most are around 7 years rather than 25 to 40.
Acceleration of deductions can significantly increase the net present value of tax savings.
Most are around 7 years rather than 25 to 40.
Acceleration of deductions can significantly increase the net present value of tax savings.
While most assets are deducted over 7 years, right now in the US as part of recent tax reform, these shorter lived assets (anything under 20 year property) can actually be deducted in the year of purchase!
So that increases NPV even more.
You still benefit here if not in the US
So that increases NPV even more.
You still benefit here if not in the US
So what does this mean for your real estate?
When you buy a property, a lot of it may not be structural to the property. Movable walls, appliances, various fixtures, lighting, etc.
Up to 20% of the real estate purchase may not even be real estate from a tax perspective.
When you buy a property, a lot of it may not be structural to the property. Movable walls, appliances, various fixtures, lighting, etc.
Up to 20% of the real estate purchase may not even be real estate from a tax perspective.
All of this could potentially be separated into shorter life assets and deducted MUCH faster.
More, in the US, most of this could be deducted in the year of PURCHASE rather than 39 years.
See what deducting 20% of your real estate purchase price in Year1 does to your cap rate.
More, in the US, most of this could be deducted in the year of PURCHASE rather than 39 years.
See what deducting 20% of your real estate purchase price in Year1 does to your cap rate.
Did your tax person forget to mention this to you?
In all of your reading on real estate tax benefits, has this come up?
Large companies ALWAYS do this with their real estate. Why don’t you?
In all of your reading on real estate tax benefits, has this come up?
Large companies ALWAYS do this with their real estate. Why don’t you?
