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Tax Benefits When You Invest in Boise Real Estate
Real estate is one of the more popular investing strategies due to its historically predictable nature and ability to maintain value over generations. Even when the market is down, it’s still wise to own property because the market will eventually change and return in the investor’s favor. Real estate investing gives one of the highest returns on investment compared to bonds, stocks, or other investment strategies. Another benefit to real estate investing is the tax benefits. Here are some of the tax benefits when investing in Boise real estate.
Tax Benefits #1: Deductions
Deductions are the most significant tax benefit for real estate investors. As a Boise real estate investor, you can deduct specific expenses associated with the investment property. Standard deductions include property tax, mortgage interest, insurance, management fees, and repairs and maintenance. You can also write off expenses that don’t add value to the property but maintain its good condition. Boise real estate investors can even deduct a mortgage on their primary or secondary residence and apply it to home purchases or home equity loans.
#2: Depreciation
When the market isn’t working in your favor, annual tax deductions help you recover the cost. Depreciation is subtracting a property’s loss in value over its expected lifespan. Residential properties have a lifespan of 27.5 years. The amount of depreciation you’re allowed to deduct is calculated by the value of your property, the recovery period, and the applied depreciation method.
For example, if you bought a rental property for $400,000, your annual depreciation deduction is $14,545 ($400,000 / 27.5 year). You can also depreciate certain expenses like a roof or HVAC replacement after a certain amount of time. Boise real estate investors can add those additions to the total amount of depreciation to your annual tax deductions.
Tax Benefits #3: Capital Gains
Capital gains are the opposite of depreciation. It’s the profits Boise real estate investors make when they sell their property. There are two types of capital gains: short-term and long-term. Both types have different tax rates and benefits.
Short-term gains reference a property that’s been owned for under one year. There are no special tax benefits for short-term gains. Long-term gains are for properties that have been held for over a year. Long-term properties are usually rental properties, offering a lower tax rate.
#4: 1031 Exchanges
Also known as the best-kept secret in the U.S. tax code, a 1031 Tax-Deferred Exchange is leveraged to defer paying capital gains on one investment property when an investor almost immediately repurchases another like-kind property. While the name may make the process sound complicated, 1031 exchanges are much simpler than most people think. And in Boise, 1031 exchanges are favored, which is why it’s wise to invest in Boise real estate.
Because we specialize in real estate investing and are investors ourselves (and our clients love that we “walk the investment talk”), Boise Turnkey Properties is uniquely positioned to guide new and seasoned investors on their 1031 exchange journeys. But, we take it a step further–1031 exchanges are specialized, so our team at Boise Turnkey Properties partners with a local 1031 exchange provider to ensure that the process is smooth and stress-free for our investor clients.
We would be honored to personally welcome you to one of the most landlord-friendly states in the nation. If you’re ready to take advantage of these amazing tax benefits as a Boise real estate investor, contact our team at Boise Turnkey Properties today! Call us today at (208) 957-0870, email us at corby@boiseturnkey.com, or fill out the form below.
**Please check with your favorite tax professional who understands your particular portfolio.
