Tax Benefits that come with being a property owner:
1. Mortgage interest deduction: As a homeowner, you can deduct the interest paid on your mortgage from your taxable income. This deduction can significantly reduce your tax liability, especially in the early years of your mortgage when interest payments are high.
Property tax deduction: Property owners can also deduct property taxes paid from their taxable income, further reducing their tax liability.
2. Depreciation: If you own a rental property, you can take advantage of depreciation deductions to reduce your taxable income. Depreciation allows you to deduct the cost of the property over time, providing a valuable tax benefit.
3. Capital gains exclusion: If you sell your primary residence, you may be able to exclude up to $250,000 in capital gains from your taxable income ($500,000 for married couples filing jointly).
4. Rental loss deduction: If you own a rental property and it generates a loss, you may be able to deduct that loss from your taxable income, reducing your tax liability.
5. 1031 exchange: A 1031 exchange allows you to defer paying capital gains taxes on the sale of a property by reinvesting the proceeds into a new property. This can be a powerful tool for real estate investors looking to build their portfolio.
Overall, owning real estate can provide significant tax benefits that can help you save money and build wealth over time.