Commercial Real Estate: Getting the Most out of Your Properties
Commercial real estate investments can be expensive. While these investment do generate income for investors, that income is taxable by the government. In order to maximize profits and reduce the taxes owed, real estate investors can take advantage of tax deductions and opportunities to reduce taxes. Examining these opportunities can help you get the most out of your commercial real estate properties.
Equity Investments and Depreciation
One way you can get the most out of your properties is through the deduction of depreciation values on taxes. Each year, properties experience ordinary wear and tear, which reduces the value of the property. This depreciation can be deducted from taxes, which provides financial benefits to commercial real estate owners. Along with other tax benefits, deducting the depreciation value of equity investments can be used to offset taxable income accrued throughout the year.
Loan Interest Deductability
Loan interest can also be deducted from taxes. The interest amount paid during a year is deducted from the amount of income received throughout the year to determine the owner’s taxable income. Deducting the loan interest reduces the amount of taxes due on the income from the property, which can save you money and help you get the most out of your commercial real estate properties.
Passive Income Rules
Finally, when income is generated by real estate equity investments through an LLC, it is considered passive income. This type of income can offset losses accrued from other passive investments. Another benefit of passive income is that it is exempt from self-employment tax. This is beneficial for investors whose home is their primary source of income. The exemption reduces the taxes that would otherwise be paid each year.
Real estate investments can be lucrative. However, the income generated from properties is subject to taxes just as any other income. In order to maximize profits and reduce taxes, taking advantage of tax deductions can help you use your commercial real estate properties to their best.