You can calculate the depreciation by determining the value of the property, minus the land, and dividing by 27.5. The IRS considers the lifespan of a residential property to be 27.5 years. Syndication investors can write off a portion of their income to account for the natural deterioration of the property and its resulting value over time.
This creates a lower effective tax rate, because the marginal tax rate will only be applied to a smaller portion of your passive income rather than the majority of earned income. Passive income through a real estate syndication investment is still subject to your marginal tax rate, but significant portions of that income can be sheltered with deductions that do not require additional expenditure. Deductions are awarded based on money actually spent, so the only way to reduce taxes paid on earned income is to spend more money on qualified expenses. Learn More Earned Income vs Passive IncomeĮarned income is subject to the marginal tax rate under whichever bracket one qualifies-and the effective tax rate, or the amount of taxes actually paid, remains quite high. We offer our investment partners the opportunity to leverage shares of multifamily rental properties into a passive monthly income. Life Bridge Capital is a leading real estate syndication company.
Here’s everything you need to know about real estate syndication tax benefits. Unlike with earned income, where one must spend money to get deductions, real estate syndication investors get to use phantom deductions like depreciation to reduce taxable income and greatly reduce taxes owed. Syndications also offer many tax benefits, notably depreciation. But that’s not the only reason to consider investing in a syndication. Real estate syndication is attractive to many investors as a means of generating passive income.
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