For real estate investors, it’s all about the bottom line. Investors are always looking at how they can save on costs and expand their cash-flow. While many real estate investors might be aware of certain tax-breaks that can be taken advantage of for investment properties, deferring taxes through cost segregation may be one that investors overlook. Institutional investors are probably aware of this tax advantage, but smaller, individual investors or those just starting out in real estate investing may be unaware.
For Michele Pasquale, the bottom line is helping investors to get more out of their properties. Michele is owner and managing member of Meridian Financial Solutions. By working directly with investor clients and through alignment with CPA firms, Meridian seeks to establish effective, long-term tax-planning strategies resulting in greater ROI potential for investors. Michele brings over 16 years of experience in real estate acquisitions and finance to help investors maximize cash-flow. This episode, Michele shares some things investors should know about deferring taxes through cost segregation.
Tax-planning tool to help investors defer federal income taxes
Allows property owners to accelerate depreciation, resulting in reduced taxable income levels
Cost segregation study identifies all construction costs that qualify for accelerated depreciation
Breaks costs into depreciation values of 15, 7 and 5 years, so they can be written-off in a shorter time-span
Dependent on size and property type
For buy-and-hold investors
Cost Segregation Qualifiers
Sinks and drains
When does Cost Segregation Apply?
Buying, building or renovating a property
Investors can go back 10 years or more on existing buildings and catch up on past depreciation
Before building or renovating, factor in cost segregation studies into design plans
Tax-planning strategy for 1031 Exchanges and Estate Planning
Tax-deferral, Not Tax Elimination
Investors should be aware that costs segregation is a strategy for deferring taxes to increase cash-flow. Taxes are applied at sale.
Contact Meridian Financial Solutions at (561) 252-7282 for more info about cost segregation and get a free estimate for tax-deferral savings.
Its tax time again. Although filing taxes can be a tedious and frustrating time for many Americans, real estate investors fall into particularly complex categories. Knowing the structure of your property business can save time and money when it comes time to file.
Kevin Walsh, CPA is an expert on all things real estate when it comes to tax structures and filing. A founding member of Atrox Partners accounting services, Kevin has over 15 years experience specializing in real estate, providing consultant services for investment and brokerage firms. This episode, Kevin discusses the importance of structuring your property business to maximize your tax returns. Kevin also discusses big changes coming to foreign investing in U.S. real estate.
Real Estate Filing Structures:
Business of Real Estate
Realtors; Brokers; Industry Servicers
Most favorable tax structure
Applicable to small and large-scale investors
Subject to loss-limitations ($3000 max)
Capital Gains/Losses advantages and disadvantages
Fix-and-Flip deals; high frequency of deals
Gains taxed as ordinary gains; not offered Capital Gains/Losses filing structure
Tax Tips for Investors
Knowledge is Power – Planning for your taxes is imperative. It is best to consult an expert to ensure the proper tax structure
Documentation – Filers need to verify they are filing within the appropriate structure; provide proof of your property business
Preparation – Prepare for taxes early…know your filing structure…certain filing limitations begin at close of each tax year
Protecting Americans for Taxes Act, 2015 (PAFT)
Revisions to previous FIRPTA, outlining terms and stipulations for foreign real estate investors
2 Provisions: 10% sur-tax on foreign investors abolished; 5% allotment for foreign investors now increased to 10%
Poised to bring influx of foreign capital into U.S. markets