Investing in real estate offers several benefits, especially during tax season. With NYC property values rising for the sixth consecutive fiscal year in 2017, more people are turning to real estate investments. If you’re considering investing in real estate or have already made an investment, it’s crucial to understand the applicable tax benefits. This article highlights some common tax advantages for real estate investors.

One significant benefit is the lower tax rate on capital gains. When you sell a property, you realize capital gains. Gains from properties held for less than a year are taxed at higher rates, whereas long-term gains benefit from lower rates. Holding a property for over a year before selling could mean lower taxes. Tax preparation services can help you determine your exact tax rates.

Depreciation is another advantage for property investors. Over time, depreciation applies to properties. You can deduct the depreciation amount from your taxes annually. When selling the property, the deducted amount and capital gains are taxed. However, if you don’t make a profit on the sale, the previous depreciation deductions won’t be taxed.

Additionally, rental property owners avoid FICA taxes. Under the Federal Insurance Contributions Act, self-employed individuals must pay the entire tax themselves. Since rental property owners are not classified as self-employed businesses, their rental income isn’t subject to FICA taxes. Tax accountants can help you determine if your property is subject to FICA.

Real estate investing offers valuable tax benefits. We hope this article has clarified some of the tax breaks available for real estate investors.

For assistance with tax preparation services in NYC, contact George Dimov, C.P.A., at NYC Accounting and Consulting Services.