ASK MICKEY, CPA: How can I use Real Estate to put off paying taxes?
ANSWER: One of the best ways to build wealth and cut taxes even with the high interest rates is investing in real estate. Some of the benefits include the ability to recover the cost of income-producing property through depreciation,1031 like-kind exchanges, deferring profits from real estate investments, and borrowing against real estate equity to make additional investments.
In Addition, homeowners can benefit from the personal-residence exemption, which shields profits on the sale of a personal residence from capital gains taxes, as well as the deduction for mortgage interest.
Investing in real estate is a good way to build wealth and reduce taxes through a variety of means, including:
Depreciation allows for the recovery of costs related to income-producing rental property.
Investors can defer taxes by selling an investment property and using the equity to purchase another property in what is known as a 1031 like-kind exchange.
Property owners can borrow against the home equity in their current property to make other investments.
Depending on the property sale value, homeowners can be excluded from capital gains taxes on the gains of their home sale.
Individuals are also able to deduct the interest paid on their mortgages.
See you tax professional for more information.
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