Tax Advantages of Real Estate
Real estate offers exceptional tax breaks for investors. While many of the advantages cited below are common to a wide range of properties, each individual investor’s objectives and circumstances are unique. Prior to investing, we encourage you to meet with a Platinum Properties Group Investment Executive to explore the benefits and opportunities specific of your own individual situation.
Tax-sheltered profits
With real estate, you can cash out a portion of your profits without incurring taxes if you refinance the property with a new mortgage and then reinvest the tax-free profits in the new mortgage. This way the profits are put to work for you.
Tax deferral
Real estate profits are not taxed until you sell the property. For example, if you purchase a home for $100,000 and it appreciates to $150,000, the $50,000 gain is protected from taxes until you sell the property. This allows your investment to grow tax-free year over year, further compounding its worth.
Capital gains tax treatment
Because real estate appreciation profits are treated as capital gains, only 50% of your gains are taxed. In contrast, interest earnings from bonds and GICs are taxed on the full amount of the gain.
Tax-free cash flow
For tax purposes, positive cash flow generated in excess of your expenses can be offset by capital cost allowance (CCA). CCA is an accounting term for depreciation due to the building’s physical wear and tear. By employing CCA write offs, your positive cash flow remains tax free until you sell your property. The ability to defer taxes on this profit center is a significant advantage for real estate investors.
Tax deductions
Financing and operating costs such as mortgage interest, property management fees, property taxes and repair & maintenance can all be claimed as deductions against rental income, further reducing the tax burden.
Real estate offers exceptional tax breaks for investors. While many of the advantages cited below are common to a wide range of properties, each individual investor’s objectives and circumstances are unique. Prior to investing, we encourage you to meet with a Platinum Properties Group Investment Executive to explore the benefits and opportunities specific of your own individual situation.
Tax-sheltered profits
With real estate, you can cash out a portion of your profits without incurring taxes if you refinance the property with a new mortgage and then reinvest the tax-free profits in the new mortgage. This way the profits are put to work for you.
Tax deferral
Real estate profits are not taxed until you sell the property. For example, if you purchase a home for $100,000 and it appreciates to $150,000, the $50,000 gain is protected from taxes until you sell the property. This allows your investment to grow tax-free year over year, further compounding its worth.
Capital gains tax treatment
Because real estate appreciation profits are treated as capital gains, only 50% of your gains are taxed. In contrast, interest earnings from bonds and GICs are taxed on the full amount of the gain.
Tax-free cash flow
For tax purposes, positive cash flow generated in excess of your expenses can be offset by capital cost allowance (CCA). CCA is an accounting term for depreciation due to the building’s physical wear and tear. By employing CCA write offs, your positive cash flow remains tax free until you sell your property. The ability to defer taxes on this profit center is a significant advantage for real estate investors.
Tax deductions
Financing and operating costs such as mortgage interest, property management fees, property taxes and repair & maintenance can all be claimed as deductions against rental income, further reducing the tax burden.
Other Benefits of Real Estate Investing
Direct Ownership & Control
Real estate investment gives you the security of direct title to a tangible asset, just like your own home. You have complete control of the property and can sell, hold or re-finance as needed.
Diversification
Not only does real estate add diversification to your portfolio mix, but diversification among your real estate assets, by property type & size or by region, further fortifies your wealth-building potential.
Freedom
In real estate, time is not only money but also freedom. Real estate investments provide their best results over time and the wealth they create frees you up for the things that are truly important to you.