There are a few parts of the tax code that especially favor real estate, and of course, it makes sense to ensure you’re able to derive benefit as much as you can from those areas.
Depending on the length of time that you hold the investment before selling it, those capital gains can be classified as either short-term (less than a year) or long-term (a year or longer).
Short-term capital gains are taxed as ordinary income, so it depends on whatever tax bracket you’re. For the typical physician, this usually puts us at one of the higher brackets which could be at 35% or 37%.
If you have owned and used a property as your primary residential home for at least two out of the last five years before selling it, you’re eligible for this exclusion.
This exclusion according to the IRS states that “if you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income.
Another big deduction is depreciation, whereby the IRS allows you to deduct the cost of business items that have a “shelf life,” like the building itself.