The Passive Income MD Podcast #51: Tax Benefits of Investing in a Syndication
Apr 19, 2021
Discover the tax-driven motivations behind why physicians turn to real estate investing. Explore five key tax benefits of investing in syndications, including the intricacies of depreciation and how it impacts K-1 forms. Learn the distinction between capital gains and ordinary income tax rates. Understand how cash-out refinances can yield tax-free returns and the benefits of mortgage interest deductions. Finally, see why passive investing might be the ideal approach for busy professionals seeking tax efficiency.
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Tax Code As A System Of Incentives
- The tax code is a set of incentives designed to influence behavior and reward certain activities.
- Real estate investing leverages many of those incentives to improve tax efficiency for high earners like physicians.
Use Depreciation Passed Through From Syndications
- Use depreciation deductions passed through from syndications to reduce taxable income early in ownership.
- Expect large negative K-1 depreciation numbers that shield cash distributions from taxes.
Capital Gains Are Tax-Efficient Relative To Salary
- Long-term capital gains from real estate sales are taxed at lower rates than ordinary income.
- That tax-rate difference makes real estate proceeds more tax-efficient than physician salary income over time.