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J.K. Lasser's Your Income Tax Professional Edition 2017 by J.K. Lasser Institute

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Chapter 31 Tax Savings for Investors in Real Estate

Real estate investors may take advantage of the following tax benefits:

  • Gains on the sale of investment property may be taxed at capital gain rates.
  • Depreciation can provide a source of temporary tax-free income (31.1).
  • Rental income can be used to offset passive losses Chapter 10.
  • Tax-free exchanges make it possible to defer tax on exchanges of real estate held for investment (31.3).

However, real estate gains may be subject to the 3.8% net investment income tax (28.3).

Losses on real estate transactions may be subject to the following disadvantages:

  • Rental losses may not be deductible from other income such as salary, interest, and dividends unless you qualify as a real estate professional or for the special $25,000 rental loss allowance under the passive loss rules Chapter 10.
  • Compromises of mortgage liability ...

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