Investment Property Loans: Tax Tips For Investment Property Buyers

Last Updated 1/12/2015

Investment property loans have become more accessible and more attractive to use. However, savvy real estate investors know that they can dramatically improve their returns even further by leveraging smart tax moves, and taking advantage of the many additional tax saving tools available to them.

The most sophisticated investment property buyers now put taxes first when analyzing new potential acquisitions, as well as how they manage their portfolios year round. So what tools and tax saving strategies are today’s leading property investors deploying to maximize their net returns and gain tax benefits of investment property?

How to Gain Maximum Net Returns and Tax Benefits of Investment Property Loans

Know and Flex Your Real Estate Deductions & Write Offs

Investing a little time in real estate investment education and learning standard deductions and write-offs can go a long way towards selecting the most profitable investments. Just don’t neglect to flex this knowledge when it comes to preparing and filing taxes, unless you want to needlessly hand over thousands of dollars to the IRS.

Use Financial Leverage

From personal residences to investment property, mortgage leverage can provide significant potential deductions and tax savings. This is on top of the advantages financing provides in adding additional safety and fast tracking real estate investors towards their goals. Mortgage interest and closing costs can all present potential deductions on investment property loans.

Self-Directed IRAs

Self-directed IRAs offer individuals some of the greatest wealth building and tax saving vehicles ever available. These genius tools allow investors to both take advantage of investment property loans for leverage and generate compounding tax deferred or free returns. Most will find this can easily add double digits to their net gains each year.


LLCs and other legal entities provide extra privacy and protection from liability while offering another whole round of tax deductions and write-offs for investors to enjoy tax benefits of investment property. These entities may even be able to obtain credit and investment property loans themselves to further reduce risk in investing.

Good Record Keeping

It doesn’t matter how great your accountant is if you haven’t kept records for tax filing all year long. Showing up with a crate of miscellaneous recipes probably isn’t going to win you a lot of favor with your tax preparer or empower them to do their best work either. This is especially true when it comes to records of paying off mortgage loans. So stay organized all year round.

Get a Great Accountant

How much income tax you pay or receive in refunds will effectively mainly rely heavily on your accountant. So get a great one. Remember your tax preparation costs can be deducted on taxes too.

Strategic Spending

Minimizing tax liability, and maximizing deductions from investment property loans can also depend on your ear round spending. So create an annual tax plan that will help you get the most out of each dollar.

1031 Exchanges

Huge tax savings can also be found when selling investment properties and restructuring investment property portfolios. 1031 exchanges can be used to defer substantial taxes that would otherwise be due on the sale of properties.