Crucial Tax Considerations for Real Estate Investors

Image from 


Are you a Real Estate dealer or investor?

Here are few aspects to consider:

  1. Buying properties periodically, fixing them up, and selling them makes you look like a dealer. But when you seldom do this , then you can qualify as an investor and hence get favorable tax treatment.
  2. If you buy and hold the property for more than one year, then investor status gives you tax-beneficial long-term capital gains treatment.
  3. When you sell the property without making any major modifications, or when you rent out the property before selling it, then you have solid investor attributes.
  4. The fix-up and/or remodeling can give you dealer attributes.
  5. The issue of dealer versus investor is a facts-and-circumstances classification, and it’s more of a judgement call based on the intent of the real estate owner.

Which status is better for you depends on your own peculiar situation and can vary for each property transaction. If you are planning on investing in real estate and have tax related questions, feel free to call me on my direct line at 714-383-2307.