Real Estate Tax Tools & Vehicles Everyone Should Be Aware Of

Overpaying in taxes just isn’t smart. With income tax brackets pushing 40%, there is a huge difference in the net incomes and wealth of those taking advantage of the breaks available to them and those who don’t. So what are some of the vehicles and tools you should be taking advantage of?

Each individual needs to consult an expert on their individual situation before taking action. It is about taking advantage of the relief the government has provided, and expects Americans to use to avoid over paying on taxes. Not using them is plain crazy and wasteful. Take advantage of the following to make sure you are getting the most out of tax season:

Good Accountants

Depending on who prepares your taxes and handles your bookkeeping, the amount of taxes you pay can vary greatly. Don’t underestimate the value of a good CPA firm and accountant.

Real Estate

Real estate is a fantastic investment, and a great tax minimizing tool for those who know what they are doing. Exact breaks and advantages may depend on a variety of factors, but can include: deductions for interest and closing costs paid, depreciation, third party services, and more. Real estate investing is also the cornerstone of many other tax saving vehicles.

Property Taxes

Owners of personal residences, commercial income investment properties, and single-family rentals all have rights to fair taxes. Unfortunately, the last few years have seriously skewed tax assessments and tax bills. Many aren’t aware that they may be eligible for a variety of discounts, as well as have the right to challenge bills and have them reduced. Don’t over pay on these taxes when you don’t have to.

1031 Exchanges

1031 tax exchanges seem to have fallen out of fashion, and out of sight since the housing crash. However, these tools can enable real estate investors to keep trading investments and earn tax deferred returns.

Self-Directed IRAs

Self-directed IRAs should really be looked into by everyone. Whether you already have a sizable 401k or are just thinking about starting retirement savings, or want to reduce your tax liability for the year, don’t let the New Year roll around without checking out the benefits of these vehicles. They are incredibly flexible and can add double digits to real estate investment returns. The compounding benefits of these tax deferring and tax free vehicles can help individuals rapidly propel their wealth, just by doing what they already are, better.

LLCs and Other Legal Business Entities

Real estate investors, and even regular homeowners, often overlook LLCs, trusts, and other legal businesses entities that could save them a lot of money. Once title is taken, many of the best benefits of these tools can be eliminated, but there is always the next deal, and the ongoing day-to-day. Operating under one of these umbrellas can provide an array of tax breaks, write-offs, and bonuses.


Nonprofits can come to the aid of individuals in many ways. Real estate owners and investors are often very generous and do plenty of giving. Keep track of donations and take the appropriate tax deductions. This can provide more money to do more giving the next year. Some are also engaged in real estate for charitable reasons, yet haven’t claimed the status they should. Ironically, there are many putting themselves out there as not for profit and charitable organizations that may be prioritizing profit. This has turned off many to using these protections. However, if you, or an organization you operate, is engaged in charitable and not for profit activities, then claiming 501c3 status can not only help prevent overpaying taxes, and put more cash toward the mission, but can encourage and empower support from a broader range of other organizations and individuals that may otherwise be prevented from supporting.

Captive Insurance

The most respected experts put down the tax advantages of establishing a captive insurance company to being the icing on the cake of the other benefits. Yet, some set them up just for the tax benefits. For real estate businesses for over $500,000 in annual taxable income, captive insurance is well worth looking into. Recent reductions in set up and operating costs have made them even more appealing to a larger percentage of real estate business owners than ever before.

Tax Free Zones

Real estate pros no longer have to engage in risky, shady, expensive, and often useless distant ‘tax havens’ and sham shelter companies to reduce their tax liabilities. Municipal governments have rolled out incentive programs, including tax breaks for helping to build up many areas, while states like New York offer Start-up NY, and Florida has no state income taxes.

Annual and Long Term Strategy

Every real estate investor ought to have a well thought out annual, and long term tax strategy which consistently minimizes tax liability, and maximizes earnings and wealth. Without this hundreds of thousands can be lost each year.