Investing in real estate in Ohio can be a lucrative venture with hard work and careful planning.
An unfortunate number of those new to real estate investing fail to take tax considerations into account, leading to unnecessary and often preventable losses. Here are some practical tax reduction tips tailored for real estate investors.
Utilize depreciation
Depreciation allows you to deduct the cost of your property over its useful life and can significantly reduce your taxable income. Ensure you are taking full advantage of depreciation by keeping detailed records and consider a cost segregation study to speed depreciation on certain components.
Leverage 1031 exchanges
A 1031 exchange lets you defer capital gains taxes by reinvesting the proceeds from a sold property into a similar one. The strategy can be particularly beneficial for investors looking to expand their portfolios without facing immediate tax liabilities.
Invest in Opportunity Zones
Ohio has several designated Opportunity Zones where investments can qualify for tax incentives. By investing in these areas, you can defer or even eliminate capital gains taxes, fostering both community development and your financial growth.
Appeal property tax assessments
If you believe your property has been overvalued, you may be able to appeal the property tax assessment. A successful appeal can lead to significant tax savings based on the property’s true value. Gathering documentation, such as recent appraisals or purchase agreements, can add weight to your case.
These strategies can do much to lower your tax burdens as a real estate investor. Someone familiar with Ohio property and tax laws can offer more customized tax reduction strategies.