Bonds and real estate attract both novice and seasoned investors for various reasons. While bonds are often seen as a steady course of action that require little maintenance, the gains in real estate are much more meaningful.
One of the reasons why real estate is more profitable is because it brings with it many tax advantages. Let’s take a closer look at how both investments stand up to the IRS.
Bond Taxation
Bonds are simply a transaction with the federal government. Therefore, taxation is pretty much a forgone conclusion and is pretty rigidly structured. The interest or profit gained above and beyond the cost of purchase is subject to federal taxes once the bond is redeemed. State and local taxes may be added if the bond is part of an estate settlement or inheritance.
Property on the other hand, allows for several exceptions when it comes to taxes.
Real Estate Taxation
Depreciation is one way that property investment helps soften the blow of taxes. That’s because it is generally assumed that wear and tear significantly decreases the value of your property every 27 years. What is even better is that you get the tax break regardless of whether you spend money on the property or not.
Additionally, collected rent is not subject to Medicare of Social Security taxes. Collectively called the FICA or payroll tax, these deductions take 7.65% of your salary of wages if you work for someone or 15.3% of your income if you are working for yourself. Making your money by collecting rent is like giving yourself a take7.65% to 15.3% raise.
In a flourishing neighborhood, real-estate traditionally increases. However, there is no taxation on appreciation. If your home appreciated $100,000 over a fifteen-year period, then that $100,00 would be tax free.
When you sell a house, you are subject to what is called a capital gains tax. However, this tax works on a sliding scale of 0% to 20% according to your tax bracket. Having a long-term property investment strategy can allow you to sell when you are in a lower bracket and thereby avoid paying capital gains.
Bottom Line: Real Estate Entrepreneurs Come Out On Top
These are just a few of the many ways in which property investment can help keep money in your pocket when it comes to tax time. Look into real estate and property development options, and you are sure to discover many more.
ABOUT RICHARD BRISSON
RichardBrisson.ca is a real estate investment company.We have been actively involved in Barrie, Ontario and surrounding area with our real estate investing. Our mission is to provide quality housing for quality tenants, while at the same time providing an above average return on investment (R.O.I) for our investor partners and ourselves. It is truly a win-win-win way of investing!
Richard offers his investor partners hands-free investment opportunities. If you are interested to learn how to earn an above-average return on your investment, backed by a solid asset, and without the hassle of being a landlord, please contact Richard.
For more information about Richard and his investment program, you may call (705) 321-2148 or email him at invest@richardbrisson.ca or visit https://richardbrisson.ca/.
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