Contributed By McGuireWoods LLP
There are a number of tax benefits available from owning real estate, including deductions for depreciation, property taxes, and mortgage interest payments. The latter two deductions have been curtailed under the Tax Cuts and Jobs Act but remain available in limited circumstances. Furthermore, depending on how the real estate asset is held, there may be a 20% business pass-through deduction available.
More than just tax deductions, taw law is abound with several real estate-specific tax incentives, like tax deferral for “like kind” exchanges, and more general ones, like the rehabilitation tax credits, energy infrastructure tax credits, and capital gains tax deferral under the Opportunity Zone program. Identifying key tax benefits applicable to owning certain real estate through certain investment vehicles potentially leads to greater economic returns.