It takes careful planning to provide for your income in retirement, and real estate investments offer fantastic tax benefits to investors. These laws exist to encourage investments in the real estate market through incentives. Missed opportunities to keep more of your income can add up over time, and knowing what you can write off on your Atlanta investment property can help guide your decisions and increase your profits over the long term. But, of course, real estate investing is a business, so you should treat it as such. In addition, each of these laws has qualifiers and complex nuances, so it is always recommended you work with a tax advisor to help. Your situation as a small time LLC may be a lot different than if you own 10 properties and are a designated Sub-Chapter S. Study up because it can save you a lot of money.
You should begin developing methods in your daily work habits that improve your odds of building a prosperous portfolio. Organized record keeping is imperative, so you will want to develop a system that makes it easy for you to succeed. It is disheartening to consider the profits that uninformed real estate investors allow to slip through their fingers because of disorganization; you will need those receipts. Missed opportunities to keep more of your income add up over time. In addition, understanding what is not an allowable deduction can keep you from veering off the pathway to deductions.
Passive or Non-Passive
It’s essential to consider the differences between passive and non-passive real estate investment income and how tax law treats each. You can further benefit from these tax laws if you are not a material participant in your real estate investment business. In other words, as a passive investor, you can write off the taxes on your Atlanta investment property through passive losses on your passive income. Document the time you spend actively participating in business activities and whether you wish to be treated as a real estate professional when you file your taxes. Suppose you spend more than half of your time participating in business activities or more than 750 hours. Then, you may be considered a “qualified” real estate professional in the eyes of the IRS. Getting your real estate license and actively being in the industry will help you obtain this designation even quicker.
Write-Offs
If it has to do with your investment properties and isn’t an improvement, but a necessary part of maintaining, managing, or the expenses you may incur for operations in your portfolio, are all areas of allowable deductions for real estate investors on your Atlanta investment property. So, if you have to call the plumber to fix a leaky pipe, you should be documenting it and presenting it as a write-off to your accountant at the end of the year.
Depreciation
One of the most considerable allowances to lower your taxes on your Atlanta investment property is through depreciation. While depreciation involves no cash flow, it allows for a deduction from the taxable income based on gradual deductions. Each real estate investment asset class falls under different timelines. The land is always in the process of appreciating, so depreciation is only for the improvements. We have seen so many W2 employees own one or two rental properties and they get money back on their tax returns compared to those same W2 employees who have no depreciation to write off getting a stiff bill at the end of each year.
Pass-Through Deduction
You should also be aware that you can write off the taxes on your Atlanta investment property through the pass-through deduction, or the Section 199A Qualified Business Income (QBI) deduction is in effect until the end of 2025 and allows for a 20 percent deduction on income from rentals on qualifying properties.
Capital Gains
You should also know how capital gains can affect the taxes on your Atlanta investment property. Maximizing your deductions requires understanding the difference between short and long-term capital gains and how to strategize to make the most of this benefit.
Incentive Programs
You should also be aware that you can write off the taxes on your Atlanta investment property through 1031 exchanges and investing in opportunity zones. In addition, you may defer the profits on selling a property with a 1031 exchange until you sell the following property; unless you decide to reinvest, you can continue deferring the profits. However, with a qualified opportunity zone fund, you may defer until the property sells or on December 31, 2026, whichever comes first. This is why consulting with a real estate attorney is so crucial. You as an investor and business owner need to know your best routes and options. Obtaining legal advice will only set you up for success.
Special Loss Allowance
You should also be aware that through the special loss allowance, you can write off up to $25,000 of the taxes on passive income for your Atlanta investment property for qualifying individuals.
Why not work with a team of professionals experienced in real estate investments that stay up-to-date on how current tax laws affect investors, like a local professional investor at ATL Cash Home Buyers? When you work with our professional investors at ATL Cash Home Buyers, we will help you find the perfect property for your investment strategy so you can write off the taxes on your Atlanta investment property. Let the pros at ATL Cash Home Buyers help you earn the highest possible returns on your investment dollar. And don’t forget to ask about our current inventory of the best properties available. Call ATL Cash Home Buyers at 404-439-9984.
