Good Planning Reduces Investors' Tax Bite

Poor tax planning can make investing in real estate significantly less profitable. Tax, accounting, and business advisory company Grant Thornton offers these tax-season tips for real estate investors.

1. Choose the right form of business. How the real estate business is formed — S Corporation, C Corporation, partnership, limited liability company, or real estate investment trust — affects how taxes are calculated. Get expert advice.


2. Read and understand your operating agreement. The language is complex, but knowing what’s in there can save you big.


3. Are you an investor or a dealer? Pick one and plan properly.


4. Maximize depreciation. Classify costs in the right categories to get the most tax advantage out of depreciation.


5. Reward key executives. Structure it properly so they can defer the tax bite.

Source: Grant Thornton (03/13/06)