In light of Donald Trump’s leaked tax returns from 1995 showing he lost $916 million, the Wall Street Journal analyzes the unique tax benefits of owning real estate, compared to other types of investments. Among some of the most significant tax benefits available to real estate investors, experts told the WSJ:
- Real estate losses find their way to an owner’s personal tax returns, which allows the owner to continue to carry losses well into future years.
- Some sophisticated real estate investors are able to claim losses on highly-leveraged properties. Therefore, Mr. Trump’s losses were probably not operating losses. Basically, it appears Mr. Trump was claiming deductions based on losing other people’s money.
- Property investors may may shift what is owed on a losing property to a winning property, thereby offsetting the tax liabilities of a successful investment against the tax deductions on a poor investment property.
The article does mention that one draw back of real estate investments is the high probability of an audit by the Internal Revenue Service, similar to Mr. Trump.