Professionals like lawyers, doctors, and real estate workers also pay a tax. Out of these careers, a real estate professional gets the maximum benefits when it comes to tax. This is especially true for people who have a reasonably high income. Let’s take a look at one of the most significant advantages a real estate professional can leverage to lower their tax bill!
When a person has real estate professional status, they can apply passive or non-passive losses to any type of income. In other words, real estate allows for paper losses. It means the business could be making money with a steady supply of cash flow along with financial appreciation, yet one can claim a tax loss.
The logic is simple; real estate is a capital-intensive industry, which means it suffers from extreme depreciation expenses. Since depreciation is a non-cash expense, it can be claimed on the tax return. Even though no actual money leaves the pocket, depreciation does create a loss in the long term which reduces income. By showing this loss on the income tax returns, the tax bill of the professional can be decreased drastically. It means real estate professionals can save a lot in their ITR.