Common tax mistakes to avoid when investing in real estate

Real estate investment can be an excellent way to build wealth and prepare for retirement. However, it is important to be aware of tax rules that apply to this type of investment. Poor tax management can have serious financial consequences.

In this article, we'll take you through the common tax mistakes to avoid when investing in real estate.

 

1. Don't ask about tax incentives

There are many numerous tax incentives that enable you to reduce your tax bill by investing in real estate. These schemes are subject to strict conditions, so it's important to get informed before committing yourself.

2. Not declaring rental income

Rental income is taxable. It is therefore important to declare it to the tax authorities. If you fail to declare your rental income, you risk a fine of up to 100% of the sums evaded.

3. Do not deduct rental expenses

Rental expenses, such as interest on loans, maintenance and repair costs, taxes, etc., are deductible from rental income. So it's important to deduct them when you file your tax return.

4. Do not keep receipts

To be able to deduct rental expenses, you must keep the corresponding receipts. These receipts must be kept for 3 years.

5. Not declaring real estate capital gains

Capital gains on the sale of real estate are taxable. It is therefore important to declare them to the tax authorities.

6. Not paying your taxes on time

Taxes on rental income are due by June 15 of the year following the date on which the income is received. It's important to pay your taxes on time to avoid penalties.

7. Don't call in a professional

Real estate taxation is complex. It is therefore advisable to call on a professional to help you manage your tax situation.

How can you avoid these mistakes?

To avoid these mistakes, it's important to find out about the tax rules applicable to real estate investment. You can consult the tax authorities' websites or call on the services of a professional.

 

By avoiding these common tax mistakes, you'll ensure that you maximize your profitability and minimize your risk when investing in real estate.

A few more tips

In addition to the tax mistakes listed above, here are a few additional tips to avoid problems with the tax authorities:

• Carry out a thorough market study before investing. This will ensure that the property you wish to buy is in an attractive area and will have a good rental value.
• Call in a real estate expert. A real estate expert can help you find the right property at the right price.
• Negotiate the price. Don't hesitate to negotiate the sale price of your property.
• Call in a notary. A notary can advise you on the legal and tax aspects of your investment.
• Make sure you havehome insurance. Home insurance will protect you in the event of a claim.
• Manage your property professionally. This will minimize risk and maximize income.

By following these tips, you'll increase your chances of a successful real estate investment.