Multifamily investments can be a highly valuable tool for fending off and lowering tax liabilities.
Experienced investors know that their net returns, income and wealth growth and preservation depend a lot on taxes. Taxes can take a huge bite out of what you earn, get to keep and are able to pass on to those you love. They can make all the difference in what you can achieve and do in your lifetime and for future generations. Fortunately, investing in multifamily property investing can do a lot to minimize taxes.
Here are just some of the ways it can help…
Real Estate Tax Benefits
Real estate investing carries a variety of potential tax benefits. Two of the most notable for many is being able to designate income and investment income versus earned income which can be taxed at different rates, and being able to write off depreciation.
Those who organize themselves as an LLC or other legal entity may be able to benefit from additional layers of tax deductions. That can include a wide variety of business expenses, as well as taking advantage of the new tax rules which have dramatically lowered business tax rates and allow some to automatically deduct the first 20% of their income.
Trusts & Estate Planning Vehicles
Smart use of estate planning tools like trusts can help multifamily investors protect the wealth and income streams they gain, and streamline the passing on of it to their heirs.
Self-Directed IRAs & 401ks
Real estate investments accumulated in IRAs can be inherited by heirs without immediate tax consequences. Self-directed IRAs and 401ks can also give multifamily investors the ability to invest and generate returns tax-free or tax-deferred. This can add double digits to the compounding gains individual investors can achieve each and every year.
By using 1031 exchanges investors can defer capital gains taxes on the sale and trading of multifamily properties. That can give them substantially more to reinvest in their next investments, which can be compounded year after year. These taxes can be deferred to years when investors have other losses to balance out gains or they are in lower tax brackets.
Unless you are a CPA, taxes may not be your favorite subject. Yet, when investors embrace them and begin using these tools in their favor, the tax factor can be one which makes all the difference in the extra returns and wealth they can gain. Being wise to these tax saving tools and benefits of multifamily investments may be just what you need to change your financial dynamics in your favor.
ABOUT THE AUTHOR
Bill Zahller is the President of Park Capital Properties and resides in Asheville, NC. As a Multifamily Real Estate Investor and Syndicator, he founded Park Capital Properties in 2016 after 14 years involvement in real estate investment. He works with accredited investors and professionals who are interested in real estate investment, diversification, and financial freedom.
Bill has been flying since high school. His father was a Naval Aviator and Captain for TWA. Bill has been flying professionally for over 25 years, 23 of those at his current company. He has accumulated over 12,000 hours and 7 Jet type ratings. He has also held Instructor, IOE Instructor and NRFO pilot positions with a large fractional flight company. He is currently flying the Global 6000 in a long range mission capacity. This keeps it interesting – one week its Beijing or Sydney; the next Rio or Rome.
Bill is also the founder of the Asheville Multifamily Investor Club. Visit www.ParkCapitalProperties.com for more information.