Regardless of how long the tax laws have been in effect, real estate agents sometimes cannot remember these laws in their day-to-day activities. A real estate agent’s clients also need to understand their legal tax privileges. Below are the top tax-related questions that real estate agents ask.
Why do most real estate investors just divide their costs into land and building? Why do they leave out personal property and land improvements?
This question has no direct or appropriate answer. The depreciation of land improvements has been an outstanding issue over a long time. As an investor, you have the luxury of enjoying all the depreciation cuts that comes your way. Do not be an investor who merely allocates for land and building. Also, take full advantage of your tax savings by splitting your cost into four categories. These four categories are: personal property, land, building, and land improvements.
What if I have an investment property that is part residential and part non-residential? How does depreciation work?
Take, for instance, a property that has a bakery on its lowest level and four apartments on its higher floors. Such a building does not follow the right scaling of residential and non-residential income from a building. Regarding the depreciation, residential buildings depreciate in an entirely different way than non-residential rental buildings. Residential buildings have an estimate of 27.5 years, while non-residential buildings have an estimate of 39 years.
What about my state’s real estate tax laws?
Be sure to conduct comprehensive research on your state’s tax laws, before investing or going into business deals. Many have been naive in dealing with real estate tax laws.
Whether you are an investor or an agent who specializes in investments, it is important to have a profound knowledge of real estate tax laws in your geographical location. You can also hire a professional tax manager who will prevent you from paying unnecessary taxes.