Investing in real estate can have positive tax consequences for you and your financial portfolio. Understanding the ways in which your real estate investing activities can help you save money on your taxes will allow you to make the most practical decisions regarding these transactions. Making an investment in commercial real estate will allow you to enjoy added revenue streams and increased diversification of your investment portfolio. Here are some of the most important ways in which real estate investments can reduce your tax liability now and in the future.

Income-producing properties can qualify for depreciation over time. This allows you to reduce your income for tax purposes by the amount of value that property is estimated to lose over time based on normal wear and tear. Depreciation is calculated independently of the overall increases in property values in your area and can be applied to repairs and replacements that are required to maintain the value of your property.


Expenses associated with your real estate investments can often be deducted on your taxes. Some of the most commonly deducted items for commercial real estate include the following:

  • Insurance on your properties
  • The property taxes you pay
  • Interest paid on your mortgage
  • Costs for repairs or capital improvements on your property

Some of these expenses can be deducted immediately. Others must be deducted over time.

Pass-through Deductions for Passive Income

The Tax Cuts and Job Act of 2018 changed tax laws to allow business owners and investors to deduct up to 20 percent of the taxable passive income generated as profits by rental properties. If you opt to invest in a commercial property like an apartment complex, duplex or other rental space, you may be able to take advantage of this deduction for your income taxes. The deduction is expected to continue through 2025 and may be continued after that time. Making sure you take advantage of this deduction will allow you to manage your tax liability in the most favorable way possible.

Capital Gains Taxes

As a property owner, you can be taxed at the time of sale through short-term or long-term capital gains.

  • Short-term capital gains taxes apply to properties that were held for one year or less. These capital gains are taxed at the normal income tax rate of the investor.
  • Long-term capital gains taxes, however, are taxed at a lower rate and are applicable to real estate holdings that are sold after the one-year period has elapsed.
In most cases, opting for long-term capital gains taxes will provide you with the greatest savings on your income taxes and the most practical support for your investment portfolio. This will allow you to use previous deductions to lower your tax liability and to offset $3,000 or more of other income against the amount you owe in capital gains taxes.

At ReProp Financial, we will work with you to help you manage your real estate investing process more efficiently. Our team will provide you with alternative funding options for your commercial real estate acquisitions. Give our team a call today at 1-800-444-2948 to submit a loan application or to ask for more information about your options for funding your real estate investments.

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