Tax benefits of real estate investment
There are many different types of investment real estate: rental houses, apartments, vacant land, commercial buildings, industrial, shopping centers or warehouses.
They all offer big tax incentives for investors who understand those benefits.
Many people believe that depreciation is the best real estate tax deduction of all. The IRS REQUIRES real estate investors to depreciate their investment properties.
Depreciation is a “paper loss” required for estimated wear, tear and obsolescence.
However, land value is not depreciable. This applies to 100% of the money invested in buying vacant land and that part of the property value apportioned to land on an improved property. (That is, land with a building on it).
Condominiums do not have a land element and 100% of the purchase price can be depreciated.
Residential income property is depreciated over 27.5 years on a straight-line basis.
Commercial property is depreciated over 39 years, also on a straight-line basis.