Investing in Real Estate, 7th Edition

14

PAY LESS TAX

As a real estate investor, you will benefit from a variety of tax deductions, tax credits, and tax deferrals that can reduce (and sometimes eliminate) your taxable rental income. Especially in the early years of ownership, you will probably pocket your positive cash flows completely free of income taxes. Upon sale of a property, the taxes that you pay on capital gains will (more than likely) range between zero and 20 percent.

No other popular investment (stocks, bonds, gold, mutual funds, hedge funds) will let you keep as much of your investment earnings as does income property. Of course, the IRS does not alert you to all of the ways that owning property can cut your tax payments. To protect your earnings and future net worth, you must develop tax-saving tactics and strategy. And looking at the depleted finances of the United States (and many other countries), tax-saving tactics will become ever more important to anyone who wants to build financial security.

THE RISKS OF CHANGE AND COMPLEXITY

At the Constitutional founding of the United States, Publius (John Jay, Alexander Hamilton, and James Madison) wrote in The Federalist:

It will be of little avail to the people that the laws are made by men of their own choice if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repeated or revised before they are promulgated, or undergo such incessant changes that no man who knows what the law is today can guess ...