When you invest in real estate you get to play by a different set of rules than everybody else.
You get to take advantage of certain tax benefits designed for business owners and real estate investors.
I wanted to share 4 tax benefits you get when you are flipping houses.
1. 1031 Exchange – this lets you defer tax when you flip a house and use the money to buy another property.
I like this because it rewards you for growing your real estate business.
Use this if you intend on becoming an active rehabber and plan on flipping multiple properties.
2. Pay Yourself First – when you receive a normal paycheck the government takes its share from you immediately, as soon as you earn it.
Contrast that with being a real estate investor. You get to use every dollar your earn before sharing any with the government.
Instead of handing it over to the government right away, you can re-invest that money all year long on your real estate ventures.
This can accelerate the progress you make towards your financial goals.
3. Deduct Day-to-Day Items – Even some experienced business owners overlook this benefit.
As a real estate investor you are allowed to deduct many of the normal day-to-day bills that you pay anyways.
Here are a few examples: Home office and the corresponding share of utilities, insurance, and capital improvements, cell phone/computer, mileage, business related travel – even if a portion of the trip is spent doing leisure activities, office supplies and educational materials.
These are just a few of the many deductions you can take advantage of.
(One of our team members even made his spouse a 50% owner. They get to discuss business over dinner and deduct the check.)
4. Self-Directed IRA – this IRS approved strategy allows you to use money in a retirement account (such as a 401k) to invest in real estate.
In other words, your self-directed IRA becomes your own personal source of lending for your deals.
Remember, I’m not an accountant so make sure to consult with one if you plan on using these strategies.
Do you want to start taking advantage of tax strategies like these?