We all think that investing in real estate is an exceptionally beneficial opportunity. Well, it clearly is, but most of us do notrealize that real estate also offers a lot of tax incentives. Karla Dennis, the founder, and CEO of Karla Dennis and Associates, Inc., believes that it matters whether you use real estate as a primary residence or as an investment. Karla is a well-accomplished tax advisor with a firm grip on all taxation-related real estate issues.
Here are some of the incentives Karla believes that real estate can offer you:
- If you are a primary resident of a real estate property, you can take a deduction for the interest on your mortgage. Also, she says, as a primary resident of a real estate property, you also get to write off your property taxes every year. This is, to quote Karla’s words, “a great opportunity for a great tax deduction.”
- Karla also encourages investing in real estate because she believes it can enable you to write off all the ordinary and necessary expenses in carrying on this income-generating activity. These expenses, she says, can range from mundane to extraordinary, such as repairs, office expenses, travel costs, insurance, and even advertising costs!
The point is, Karla says:
“Real estate not only can help you generate awesome income; it also gives you valuable tax incentives.”
Now, you may think investing in real estate is lucrative, and you are right. However, as a complete expert in real estate-related issues, Karla has a warning for you. She sees firsthand that many investors create a tax tangle for themselves when they invest in real estate because they are not fully prepared and do not properly understand the compliance required for tax purposes.
Here are some vitally important things Karla wants you to know before investing in real estate:
- Make sure you fully understand the compliance required for tax purposes. If you do not, consult a tax advisor, such as Karla herself, who is also an expert in real estate-related issues.
- Do not take owning a rental lightly. It may look like a passive and easy activity, but you need to treat it as a proper business.
- Track all your expenses and incomes.
- Make sure you have proper insurance coverage.
- If you are an investor and have rental property, your insurance policy needs to be a landlord policy.
- Use an attorney or escrow office in the state where you are purchasing the property to ensure things are done correctly. That is because she says that when dealing with deeds, you are required to understand dozens of state-specific rules.
Whether you are a seller in the real estate world or a buyer, always think of how it is going to benefit you in the long run. That is why you should never take tax out of the equation. Karla says:
“The most important thing is to understand how real estate is going to benefit you both from an asset owning perspective as well as a tax perspective.”
In her practice, Karla regularly comes across many clients who sell their real estate and then worry about the tax implications. This is a mistake you must never make. She says:
“Always have a tax strategy before selling real estate.”
How can Karla help you?
Karla Dennis and Associates, Inc. regularly deals with real estate clients. Karla and her team work alongside investors running scenarios on the tax benefits of the investment so they will know their ROIAT – return on investment after tax because this can really make a difference. Her firm can assist you with 1031 or tax-deferred tax planning and perform cost segregation studies for you to accelerate your write-offs. To mention the most important thing, Karla and her firm educate their clients on how to get the best tax deduction on their real estate.
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