![]() Passive real estate investors should expect to be taxed as follows: This makes you a passive real estate investor, as is the case with most who buy real estate as an investment. You are a physician who spends their 8-to-5 (and well beyond) in a clinic or hospital, tending to your real estate properties on an as-needed basis. ![]() Let’s assume, for now, that you are not a “Real Estate Professional” according to IRS rules. In This Article Overview of How the IRS Taxes Real Estate Incomeįirst, let’s learn about how the tax code views real estate income. We’ll take a look at the benefits this designation carries and how you might be able to qualify. As you’ll see, there’s a special tax benefit to becoming a designated “real estate professional” in the eyes of the IRS. ![]() In this article, we take a deep dive into how real estate income is taxed. There are other nuances to how rental real estate income is taxed-nuances that are not as well understood by average investors. A taxpayer can write off depreciation even if a property is profitable and appreciating in value. In short, depreciation is a deduction that owners can take over several years.įor residential properties, depreciation is taken over a 27.5-year period, which the IRS considers the “useful life” of a residential building.įor example, a rental building with a cost basis of $250,000, where the land is worth $100,000, would generate depreciation of $5,455 per year ($150,000 / 27.5 years) which can then be used to offset your taxable income. This passive income is also highly tax-advantaged, meaning there are several ways to offset the taxes you’d otherwise pay on this income.ĭepreciation is one such example. Owning real estate is an excellent way for physicians to earn passive income.
0 Comments
Leave a Reply. |