This week, I thought it would be interesting to outline some of the tax benefits that come with owning real estate. Investing in real estate, in my opinion, is one of the best ways to build wealth. Not only are you saving on taxes, but you are also generating income and building equity the longer you hold onto a property. Here are really simple explanations of important tax-saving tools. This will get you started in understanding these options, but check in with your accountant for more details.

Simply put, a 1031 exchange allows you to defer paying capital gains taxes on a property that you are selling. Capital gains are taxes imposed on the profit when you sell an investment. With a 1031 exchange, you can reinvest the profits from a property sale into another similar property that is the same price or greater. You have a certain amount of time to do that. It's an amazing tool and one worth exploring. It can't be used on your primary home most times.

This offers significant savings on your property taxes, giving Massachusetts homeowners the chance to reduce their taxes in exchange for letting their land be used for public benefits, such as:

There is a minimum acreage requirement that must be met to qualify for the tax savings. For example, a dedication of at least 10 acres is necessary if you intend to use your land for growing Christmas trees or harvesting forest products. Some owners choose to lease out their additional acreage to farmers, ultimately benefiting from Chapter 61 and paying minimal property taxes. The minimum amount of land required for farming purposes is 5 acres. Who doesn't love a farm?!

Cost segregation is a method for investors to accelerate the depreciation on their properties, resulting in tax savings. For those unfamiliar, depreciation is officially defined as "a reduction in the value of an asset with the passage of time, due in particular to wear and tear." Owning investment properties comes with the perk of depreciation. Rocket Mortgage succinctly explains cost segregation: "Cost segregation allows you to expedite this depreciation schedule, increasing the deductible amount each year. Through this strategy, you can reduce the income taxes you owe annually, consequently lowering the expenses associated with owning investment real estate." It's an excellent tool! However, it's essential to conduct research to ensure both you and your property qualify for this.

 

Finally, it was enjoyable to be quoted in the Boston Globe a few weeks ago regarding the luxury market in Metro West. Here is an excerpt. Enjoy and have a great week.

14 Audubon Road, Wellesley

$1,649,000

Click here 14 Audubon Road

 

Launcher Way, Wayland

$859,000

Click here to see Launcher Way

 

The Belclare Unit 306

580 Washington Street, Wellesley 

$3,249,000

Click here to see The Belclare

 

I'm always available and more than happy to provide an analysis for you! Email me at teri@mgsgrouprealestate.com or call at 617-306-3642 to schedule a meeting.

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