HomeUnion specializes in real estate investing and they share some tips on how to lower the tax investors have to pay when it comes to profits from real estate. When it comes to investments, real estate is considered to be the most popular option yet the most lucrative as well. Based on the latest poll conducted by Gallup, majority of Americans have chosen real estate as the best option when it comes to long term investment compared to acquiring assets like stocks.
In the case of the richest individuals, real estate has proven to be the most profitable investment. Looking at the new list of Forbes magazine’s billionaires for the year 2015, there are 23 new people on the list and they have achieved their position thanks to their investment in the real estate. Forbes also disclosed that of the total individuals on the list, 157 are billionaires because of the real estate market.
The only downside with real estate investments is the tax imposed on the profits which can amount to something big most of the time. This is true particularly to the long-term capital gain tax required by the federal government. For Americans with over $400,000 modified adjusted gross income or $450,000 when filed jointly by a married couple, this has increased by 5% from the original 15%. There was also an increase in the Net Investment Income Tax from 20% to 23.8% and is expected to continue increasing up to 28% which could greatly affect the gains.
Though there are many secrets on how to succeed in real estate, there is one trick that should be familiar to those who want to save around 30 per cent of taxes from their capital gains and this is referred to as the 1031 exchange.
The vice president of Riverside Abstract who is also a certified specialist, Michael Brady, shared that this trick is not known to many investors and real estate lawyers are not even aware of it.
For veteran investors, the 1031 exchange can be used to add more to their portfolios by letting go of one high priced investment in favor of a number of smaller ones or putting their money in places where there are many bargains.