Investments come in many different forms, from stocks and mutual funds to real estate. As professional accountants and Enrolled Agents, Whyte & Associates, Inc. of Rancho Cucamonga, California, understands the unique obligations and potential challenges associated with these varied opportunities to grow one’s personal and business wealth. With good planning and foresight, tax savings can be secured and liabilities minimized, regardless of the type of investment vehicle accelerating your nest egg.
Real estate-specific outlook, opportunities
Largely, real estate has been an attractive proposition, driven partly by economic growth, demand across property types, competition among investors, and the abundance of capital and liquidity driving up values, even in a historically high interest rate environment. Combined with strategic insights courtesy of a valued and trusted tax partner like Whyte & Associates, Inc., you can realize all of the potential opportunities presented by real estate investments and elevate successes on this front to new heights. Notably, we can advise on and answer questions related to:
- Favorable timing for reselling or otherwise “flipping” properties – This is an important consideration because turning these transactions around too quickly can set you up for hair-raising tax liabilities. Depending on how fast you resell, you may be taxed on profits at the “normal” rates or, more favorably, as capital gains.
- The healthiest “pipeline” of closings/deals per year – Again, the number of transactions or transactional volume annually could dramatically and adversely affect your tax liabilities. For instance, if you sell more than a few properties in a given year, you may be classified as a dealer (subject to higher tax liabilities) versus a run-of-the-mill investor.
- Minimizing capital gains – One way to accomplish this is to hold on to an investment property for 24 months or longer. You will need to establish the investment as your “primary residence.” This process eliminates the capital gains tax (up to $250,000 and $500,000 for single-filers and joint-married filers, respectively). We can address other measures to defer capital gains taxes, too. While not doing away with this tax completely, 1031 exchanges allow investors to take profits from sales and reinvest them into new properties without being subject to capital gains.
- Make use of equity – Make the most out of the value built up on your mortgaged property. It may be prudent to free up some monies by using that equity as related home equity loans or lines of credit. Notably, the interest that may be paid on these loans will be significantly less than the taxes paid on capital gains.
- Leveraging depreciation – Our accountants are knowledgeable about the very latest related to deductions. Real estate investors should take advantage of depreciation-oriented deductions. A certain amount or percentage of the property’s value may be deducted annually to account for depreciation. However, some tax implications kick in when you go to sell the property, which we will need to discuss with you.
Call (909) 575-0080 to schedule an appointment with one of our skilled and experienced tax professionals at Whyte & Associates, Inc. Our team in Rancho Cucamonga, CA, has trusted guidance specific to your situation and the nature of your investments.
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