A few Investment Real Estate Tax Tips

All of these tax tips are current and in effect at the time of this writing. However, as with all matters tax-related, verify with your tax advisor before attempting to use them - you know how Washington loves to tinker with things.

  • In order to claim many of the tax benefits associated with owning investment real estate, you must be actively involved in the property's management. Actively involved - according to the IRS - means that you set the rents, approve tenants, and decide on capital improvements. It doesn't mean that you can't hire management help; it simply denotes that you must remain in control.
  • Tax depreciation is an accounting procedure that creates a loss in value for the purpose of tax deduction. It has absolutely nothing to do with whether a property has actually gained or lost value in the marketplace. Straight-line depreciation is used to reduce the value of the property by set equal amounts each year over its established economic lifetime (27