The 5 Most Overlooked Tax Incentives Real Estate Investors Miss

Real estate investing can be complex, and investors certainly have plenty of details to keep track of. While there may be many things competing for your attention, it's important not to overlook the potential tax benefits available for your property. Failing to claim certain tax credits and incentives can cause investors to miss out on substantial savings and lower their cash flows. In this blog, we'll explore the top five most commonly overlooked real estate tax credits and incentives so that you don’t miss out on them.

tax incentives

  1. Cost Segregation

    Cost segregation is an often-underutilized strategy for real estate investors that can lead to substantial tax savings in the first year. This strategy involves classifying building components into various depreciation categories, which can help accelerate depreciation and reduce the investor's tax liability.

    Cost segregation can also free up money for reinvestment, allowing investors to upgrade their properties, purchase new assets or invest in other income-generating opportunities. However, it’s important to note that cost segregation studies should only be conducted by a qualified professional knowledgeable about IRS regulations. At Engineered Tax Services (ETS), we guide investors through the cost segregation process to help them achieve the maximum tax savings possible.

  2. Energy Tax Incentives

    Real estate investors can take advantage of tax credits and deductions by investing in energy-efficient upgrades. The 45L credit and 179D deduction are two of the most notable energy tax incentives available to property owners. Those who invest in energy-efficient homes and multi-family units can benefit from 45L, which allows for a tax credit of up to $5,000. Additionally, commercial and four-story-plus residential building owners may qualify for 179D, providing a deduction of up to $5 per square foot for meeting energy-efficient and labor requirements.

    By working with qualified professionals such as those at ETS, investors can identify eligible projects, estimate potential savings and ensure compliance with legal requirements. Additionally, improving a building’s energy efficiency is a great way to do your part for the environment and can even help increase the overall value of your property.

  3. Wireless Infrastructure Technology

    Leasing rooftops or land to cellular carriers for 5G transmitters is a profitable way for real estate investors to earn additional income from their properties. Property owners can earn around $20,000 in extra revenue, making it an excellent way to capitalize on their properties and boost their bottom line.

    Investors should always make sure that the contract between them and the cellular carrier is well-drafted and complies with all legal requirements. At ETS, we provide investors with the necessary legal support and knowledge to protect their interests and maximize the value of their properties.

  4. Dispositions

    Real estate investors can benefit from business deductions by disposing of individual assets when renovating or demolishing a building. Disposing of old and outdated assets can lead to additional tax savings and incentives, as well as a more sustainable and valuable property. By working with ETS to conduct a disposition study, investors can identify eligible assets for disposal and claim all tax credits and deductions available to them, leading to significant savings and increased profitability.

  5. Recapture Minimization

    Real estate investors can minimize recapture taxes by allocating the sale price of a property between real property and personal property. This can help reduce their tax liability and maximize the benefits of cost segregation.

    Holding onto the property for 3-5 years after a cost segregation study can give investors enough time to put the new cash flows to use and make the most of their investment. By working with ETS, investors can minimize recapture taxes and maximize the benefits of cost segregation, ultimately leading to higher profits.

Conclusion

It is clear that real estate investors have a wide range of lucrative tax credits and incentives available to them. However, too many investors overlook these opportunities, leading to missed financial benefits. By working with qualified professionals like those at ETS, investors can take advantage of these often-overlooked tax strategies, maximize their potential savings and reduce their tax burden—all of which leads to increased profitability.

Our team of tax experts guides investors through the cost segregation process, evaluates properties for energy tax incentive suitability, assists with 5G rooftop leasing, identifies eligible assets for disposition and minimizes recapture taxes. Contact ETS today to learn more about how we can help you take advantage of these valuable tax credits and incentives.

Recent Posts

IRS Guidance on I.R.C. § 41 Research Credit Refund Claims: What You Need to Know

Navigating the complexities of tax credits can be daunting, especially when it comes to the I.R.C. § 41 research credit. This credit, designed to incentivize research and development (R&D) activities, offers significant financial benefits but requires meticulous documentation and adherence to specific guidelines. Recent guidance from the IRS Office of Chief Counsel, outlined in Memorandum

Read More »

Can Cost Segregation Be Used as a Planning Tool in Real Estate Investments?

In the world of real estate investing, savvy investors are always on the lookout for strategies to maximize profitability and streamline financial management. One such strategy that has gained significant traction is cost segregation. But can cost segregation truly serve as a planning tool, beyond its immediate tax benefits? The answer is a resounding yes.

Read More »

Contact Us