Benefits of Investing in Commercial Real Estate
Commercial real estate ventures are one of the most lucrative projects for investors, allowing them to reap benefits such as steady cash flow while building equity. In addition to this, owning a commercial property also comes with tax benefits, allowing you to get maximum gains from your investment. Below, we take a look at these pros.
Capital Gains Taxation
Commercial real estate allows investors to realize long-term capital gains through the sale of their properties, with the rates for these investments often falling in the favorable 0-20% range. This contrasts with short-term gains, usually taxed at the regular tax rate. This margin will make a significant difference if you fall in the high income bracket, providing massive profits from selling your property.
Deductible Depreciation Value
Another benefit of commercial real estate is the deductible depreciation it affords investors. This is often estimated from the wear and tear of the property, allowing the owners to recover part of the maintenance expenses. This is then conveyed to the financial report, helping you offset the taxable income that your property is likely to attract. The result is lower tax, increasing your overall profits.
Unlocks the Passive Income Rule
Income realized from any passive activity where you do not take an active role is exempt from self-employment tax, making it a handy part of holding commercial real estate property. It also exempts you from ordinary tax income realized from ventures such as flipping houses, allowing you to realize profits from passive investments. In addition, profits realized from passive activities can also be used to offset losses from unsuccessful ventures, with these gains often taxed at a marginal rate.
Deduction of Mortgage Loan Interest
A trickle-down effect of having reduced taxable income is that it allows you to have a reduced loan interest. Since mortgage loan interest is classified as a deductible expense, your tax burden also significantly decreases due to the write-off on your mortgage loan. This increases the margin on your property, allowing you to get increased overall returns.
Brightview Commercial Capital is your go-to if you need funds to invest in commercial real estate, with our solutions tailored to investors looking to get the most out of their ventures. Call us today for help with real estate financing.