*Disclaimer* I am not a Certified Public Accountant (CPA) or tax professional. Just some guy who read books about taxes. Taxes will make you rich! 🙂

Taxes are one of the four pillars of real estate wealth! Investing in Real Estate comes with many benefits. Tax advantages are one of the most underrated of these benefits. Too often we spend our time griping about taxes, but we fail to understand how to use them to grow our wealth!

We have all heard that the rich evade taxes (most recently President, Donald Trump). Have you ever stopped to realize that they pay a smaller percentage in taxes because they utilize proper tax-planning?

The rich pay plenty in taxes, but they pay a smaller percentage because they create jobs and housing in ways that the government wants!

Why do tax incentives exist?

The Government writes their tax laws in such ways that influence the economy.

If the economy needs more jobs the Government will give tax deductions to business owners and corporations.  If the economy needs more houses built they will provide incentives for home-builders/real estate investors. Likewise, if they need more affordable housing then deductions will be given to landlords.

When you understand the tax code or hire a skilled CPA, you can build a solid tax strategy in order to build multiple tax deductions into your portfolio.

Put your Taxes to use!Every Dollar Saved on Taxes is a Dollar to Invest!

Earning an extra $1,000 is great, but after taxes, it's only $600-700 dollars.

When you get $1,000 back from taxes you get to keep the whole thing!

Mortgage Interest

Homeowners can deduct the interest payments on their primary residence. That is the same for business owners, and it is nice to receive a little of your interest back at the end of the year from taxes! This incentive should help to justify the debt service required to purchase your properties!

“Tax-Free” Refinance

Cash withdrawn through a cash-out refinance does not get taxed. That is great knowledge for those of us that use the Buy, Rehab, Refinance, and Repeat (BRRR) strategy to invest in rental property. You can pull all of your capital back out of the property during a cash-out refinance and not get penalized at all! This is how investors are able to essentially purchase homes and then get all of their money back!

This allows you to buy another property without sacrificing any of your down payment. Taking money out of an old investment, and placing it in the new investment without paying taxes is a huge wealth multiplier!

Primary Residence Tax Advantages

Sale of a primary residence may be exempt from capital gains tax (up to $500K). In order to take advantage of this, you must have occupied the primary residence for at least two cumulative years out of the last five years.

This can make the decision to sell more beneficial when moving to another house or location. Selling your primary residence without paying taxes allows you to put more money into your next property!


According to InvestopediaDepreciation is an accounting method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting purposes.”

That means that every year you get to claim a percentage of your real property as a tax deduction. This is great because you are getting to claim depreciation benefits on an asset that could potentially be appreciating! This is designed to help offset the cost of maintaining properties over time, but if you're smart this money can be put into new investments, and still help with maintaining the current property!

The table below is straight from the IRS. As you can see residential structures depreciate over 27.5 years, but you can depreciate specific pieces of the real estate even faster!

Depreciation Table

I used this calculator to illustrate the amount of depreciation I can claim every year for my duplex! I can write off almost $3,000 of my rental income just because this is building getting older!

Depreciation rate for taxes on my duplex

1031 Exchange – AKA Tax-Deferred Exchange

This allows for the deferment of all capital gains tax upon the sale of a property. That means you can sell a home or apartment complex without paying any taxes as long as put the money back into a property of equal or greater value!

This is a tricky transaction to complete and there are several restrictions on it. You must have a qualified intermediary (ask your tax professional to refer one) hold the money throughout the process. You have to identify the property that you are purchasing within 90 days of selling the old property. The new property must be of equal or greater value than the old property.

For that reason, this is a great way to build your real estate portfolio by upgrading properties without losing money to taxes! This technique allows for compound expansion of your wealth.

Taxes are deferred, not eliminated. You will still need to pay taxes on these purchases later on. That means you will have a higher tax payment, but you will have a much larger portfolio to support this tax payment! Also, if proper estate planning is done you could avoid paying these taxes as long as you still own this Real Estate portfolio upon your death.


Taxes will make you rich!

If you know how to use them, conduct proper tax-planning, and reinvest your tax return.

This year I was baffled when a couple of my coworkers informed me that I had messed up by paying a CPA to do my taxes. Apparently, it is a common mindset in the military that paying to do your taxes is a ripoff. The base even sponsors free “tax centers” where Marines volunteer to help you do your taxes for free. For the individual that doesn't know how to build their wealth, this is acceptable.

For the Entrepreneur, investor, and small-business owner this is tax-suicide. Pay a CPA to do your taxes, and pay a CPA to do your tax-planning for the next year. We almost doubled our return this year by planning and filing with a great CPA!

Here is a much better article on taxes that I have written!

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0 thoughts on “Taxes will make you rich!”

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