How To Get Your Tax Money Back From The Government

***Disclaimer: We're not accountants! Please find a great CPA and ask them all your tax related questions***

The Government Gives You Great Tax Breaks

Look around the housing projects in any inner city and you'll agree, the government is pretty bad at managing rental units. They know that too. So there are many incentives built into the tax code to encourage you to buy property. For example:

Depreciation, the Phantom Loss

As a property investor, you are allowed to depreciate the value of your buildings down to $0 over 27.5 years. To calculate this, subtract the land value and divide by 27.5. So a $375,000 property with $100,000 worth of land would give you a $10,000 write off every year.

Check with your accountant first, but most investors can also write off interest, fix up costs, building related expenses, travel, etc.

1031 Exchange: Protect Your Appreciation

Unlike paper investments, you can put off paying capital gains taxes forever with a 1031 Exchange. When you sell your investment property, the profit goes into a 1031 exchange company's escrow account. Use this money to buy another property in the next 3 months and defer the capital gains taxes. Once again, verify all tax strategies with your account, but many investors have put off paying capital gains taxes for a lifetime.

LLCs Protect Your Properties

You can also protect yourself and your properties from lawsuits by setting up individual LLCs for each property. Read more about how to set up LLCs in Landlord Tools.