from your income property investments. With real estate being one of the most tax-favored assets in America, and taxes being one of the largest expenses in America, tax benefits become a large and important part of real estate investment. Here are some of the reasons why.
Jason Hartman has said income property is probably the most tax-favored asset available today. Because taxes are currently some of the biggest expenses today, with 40-60 percent of our income going to taxes on average, this is great news for real estate investors which could lead to massive tax returns.
Components of Income Property
When we use the term “real estate investment” or “income property,” we use the term generally. In reality, there are two components to take into consideration. The land, and the property sitting on the land. Everything sitting on the land can be called “packaged commodities.” Commodities aren't actually tied to the dollar, and according to the IRS, will eventually collapse.
The House Will Eventually Fall
The perspective of the IRS is that the property will eventually fall, and once it
falls, it will no longer be of value. While the house will eventually collapse, the land will always be there, and the land has value as well. The land will permanently remain, but the property will begin to depreciate as the years go on, and we can claim this as a tax benefit.
A Non-Cash Write Off
If we say the value of the home is about $150,000, and the value of the land is about $30,000, the total value of the property is roughly $180,000. The IRS says to depreciate the land over a period of 27 ½ years. If you take the
value of the home ($150,000) and divide it by the number of depreciation years (27.5), you'll end up with a number resembling $5,454. This number is the write-off you'll receive each year.
This is probably one of the best tax benefits available. It's basically a non-cash write off, meaning, this is a tax benefit which you don't pay for. Instead, you're sent a check every year. We're not tax experts, however, if you qualify, this is a write-off you could receive yearly.
It's important to note that, currently, this is real money.
No IOU's. Jason Hartman himself received a check for $109,000 from this tax benefit alone, and if you qualify, you can too. (Top Image: Flickr | 401(k) 2012)
The Young Wealth Team