Accelerated depreciation is a method for allocating the cost of an asset in a manner that provides greater deductions in the earlier years of the asset's life. This method is advantageous for tax purposes, offering businesses the opportunity to defer tax payments.
The rate of return on an equity interest in real estate, taking into account financing costs and income tax implications of the investor.
The Alternative Minimum Tax (AMT) is a parallel tax system designed to ensure that taxpayers who claim certain deductions and credits still pay a minimum amount of tax.
Conduit tax treatment allows income to pass through an entity without additional taxation, making certain entities preferred vehicles for real estate ownership as they distribute income and losses directly to their owners, maintaining the earnings' nature.
Cost segregation is a tax strategy that helps businesses and property investors accelerate depreciation deductions. By identifying personal property assets and separating them from real estate, businesses can apply shorter depreciation periods to these assets, thereby realizing greater tax depreciation deductions in the early years.
Double Declining Balance (DDB) is an accelerated method of depreciation used for tax purposes, applying twice the straight-line depreciation rate to the remaining book value of an asset.
Double taxation refers to the taxation of the same income at two different levels, typically at the corporate and individual levels. This often occurs when income is taxed once at the corporate level and again at the shareholder level when dividends are distributed.
The effective tax rate is a measure used to compare the tax payments with the market value of the property or annual income, facilitating comparisons across different jurisdictions with varying assessment ratios.
Federal subsidy recapture refers to the required repayment of a federal subsidy received on a mortgage loan if the property is sold or disposed of within a specified period, typically nine years.
GAAP (Generally Accepted Accounting Principles) constitutes a common set of accounting standards, principles, and procedures that companies and other entities use to compile their financial statements.
A deduction that allows taxpayers who use part of their home for business purposes to deduct certain expenses from their taxable income.
Interest deductions under current tax law vary based on the type of interest incurred. From investment interest to consumer interest, different rules apply for deductibility.
Long-term capital gain refers to the profit earned from the sale of a capital asset that has been held for longer than a specified holding period, allowing it to qualify for favorable tax rates.
The marginal tax bracket represents the amount of income tax that an investor would pay on the next dollar of income. Generally, the marginal rate that one pays is higher than the average rate because of the progressive tax rate structure.
The Modified Accelerated Cost Recovery System (MACRS) is a method of depreciation used for income tax purposes in the United States. It allows for the accelerated depreciation of property over specified recovery periods.
The Mortgage Interest Deduction is a tax incentive for homeowners which allows them to deduct interest paid on a mortgage of their primary residence or secondary residence from their taxable income.
An ordinary loss is a loss that is deductible against ordinary income for income tax purposes and is generally more beneficial to a taxpayer than a capital loss, which has limitations on deductibility.
Ownership form methods influence various aspects of real estate management including income tax, estate tax, continuity, liability, survivorship, transferability, disposition at death, and bankruptcy.
Progressive taxation is a tax system where the tax rate increases as the taxable amount increases. This taxation method aims to distribute the tax burden more equitably, making wealthier individuals or entities pay a higher portion of their income or assets.
A Real Estate Investment Trust (REIT) is an investment vehicle that allows investors to invest in real estate or mortgages without directly owning the property. REITs avoid double taxation by distributing most of their income to shareholders and complying with specific IRS requirements.
The standard deduction is a flat amount that reduces federal or state taxable income, differing based on the taxpayer's filing status.
The tax base refers to the collective value of property, income, or other taxable assets and activities that are subject to taxation. It is crucial in determining tax revenues as it forms the basis upon which tax rates are applied.
A tax credit is a direct reduction in the amount of tax that a taxpayer owes to the government. Unlike tax deductions, which reduce the amount of taxable income, tax credits reduce the actual tax due, providing dollar-for-dollar savings.
A tax deduction is an expense that can be subtracted from an individual or entity's gross income to reduce the amount subject to tax.
A tax liability refers to the amount of tax debt owed to the Internal Revenue Service (IRS) or a state's tax authority. These liabilities can result from income earned, properties owned, or other taxable activities.
Tax-sheltered income refers to income received, particularly from rental property, that is not subject to taxation, creating a tax benefit for the property owner. It typically occurs when depreciation expense claimed for income tax purposes exceeds mortgage principal payments.
An unincorporated association is a type of organization formed by a group of individuals who come together for a common purpose but have not gone through the legal process of incorporating. This means the association does not have a separate legal identity from its members.
