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How Taxes Can Increase Your Multifamily Earnings

Updated: May 22, 2023

There are many ways investors can increase their real estate earnings, but one that’s always worth exploring is tax advantages.

Favorable tax treatment allows investors to keep more profits by accounting for investment-related expenses. Once filed and established as part of the operations, these tax advantages deliver better yields for years to come.

Continue reading to find out the tax benefits you can enjoy with your multifamily investment....

Depreciation. This tax break anticipates the cost of wear and tear on your property. While depreciation does not reflect actual changes in property value or cash flow, investors can deduct the anticipated decline to ease their tax burden and generate savings. Under syndication investors can take advantage of this “paper loss” of a property.

Depreciation values are mapped out over 27.5 years, providing investors with expected rates of decline. However, cost segregation allows for accelerated availment of this tax break after a thorough property assessment. An expert will determine the appropriate value after accounting for actual decline of the property’s component parts.

Passive Income Tax. Those interested in multifamily properties find another reason to invest in this tax classification, where non-professionals enjoy lighter tax dues under passive income tax. Those considered passive entities will have tax duties under passive income versus the higher federal income tax.

1031 Exchange. Investors seeking to build their wealth with multifamily investment can also apply the tax benefit of performing a 1031 exchange. Under this tax break, investors may defer the capital gains taxes on the sale of a property to reinvest the pre-tax profits in an equal or greater value property. In deferring the taxes on a sale, investors retain more buying power can have more buying power for their next deal. These are just some of the tax benefits offered in multifamily investments.

Gain the full range of benefits of this passive investment in Texas by reaching out to our team at Makaan Investment Group. Makaan offers Multifamily Investments in Houston, Texas. View our portfolio to see the opportunities available to you.

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