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Let’s be honest—tax planning probably isn’t the first thing that gets you excited about real estate. But here’s the deal: if you’re not thinking about taxes, you’re probably losing money. And we’re not talking pennies. We’re talking thousands.
The good news? You don’t have to be a tax pro to get smart about this stuff. You just need to know what the seasoned investors know—and steal a few of their moves.
Taxes and Real Estate: What’s Actually Going On?
Okay, quick breakdown.
When you own real estate, you usually make money in two ways: rental income and property appreciation. Uncle Sam wants a cut of both. But how much of a cut? That depends on how you play the game.
The IRS lets you write off things like repairs, interest, and property management fees. But the real magic comes from depreciation—basically a fancy way of saying your property “wears out” over time, even if it’s going up in value.
And here’s where things start to get interesting.
How the Pros Cut Their Tax Bills (And You Can Too)
Let’s walk through some of the top moves that experienced investors use to shrink their tax bills—and fatten their wallets.
1. The 1031 Exchange Trick
This one’s simple: Sell a property, buy a new one, and defer paying taxes on your profit. As long as you follow the rules (and there are a few), you can roll your gains into the next property—tax-free for now.
It’s like hitting the pause button on capital gains taxes while you build your empire.
2. Depreciation (and the Supercharged Version)
We talked about depreciation earlier, but here’s the kicker: The IRS lets you deduct a portion of your property’s value every year. And if you qualify… Read More
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