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How to Secure Tax Savings Through Real Estate Ownership

How to Secure Tax Savings Through Real Estate Ownership

As a financial coach, I understand the importance of maximizing your financial benefits, and when it comes to real estate, there are numerous tax strategies that can help you leverage property ownership for significant tax savings. In this guide, we'll explore several key strategies to enhance your financial portfolio through smart real estate decisions, with a special focus on maximizing deductions and the inherent benefits of owning your primary residence.

Understanding the Basics of Real Estate Taxation

Before diving into specific strategies, it's essential to understand how real estate taxation works. Property taxes are typically assessed by local governments and are based on the assessed value of your property. However, the way your real estate investment is taxed can vary significantly depending on its use—whether as a primary residence, a rental property, or for business purposes.

Maximizing Deductions on Your Primary Residence

Owning your primary residence comes with several tax advantages. The IRS allows homeowners to deduct mortgage interest on up to $750,000 of mortgage debt, which can lead to substantial tax savings. Additionally, property taxes paid on your primary residence are also deductible, subject to a combined limit for state and local taxes of $10,000 per year.

Homestead Exemption

Many states offer a homestead exemption that can reduce the taxable value of your primary home, thus lowering your property taxes. This exemption not only helps reduce your annual tax burden but also protects the value of your home from creditors and can provide shelter in the event of the death of a homeowner's spouse.

Capital Gains Exclusion

One of the most significant benefits of owning your primary residence is the ability to exclude up to $250,000 ($500,000 for married couples) of capital gains on the sale of your home, provided you've lived in the home for at least two of the five years immediately preceding the sale. This can result in a hefty tax break when it comes time to sell.

How to Secure Tax Savings Through Real Estate Ownership

Strategies for Rental Properties

Rental properties offer different opportunities for tax savings. In addition to mortgage interest and property tax deductions, landlords can benefit from:


Depreciation is a powerful tax deduction available to rental property owners. It allows you to deduct the costs of buying and improving a rental property over its useful life, thereby reducing your taxable income each year.

Expense Deductions

Virtually all expenses related to the management and maintenance of a rental property are tax-deductible. These include repairs, utilities, insurance, and fees paid to property managers.

Taking Advantage of 1031 Exchanges

A 1031 exchange, also known as a like-kind exchange, allows investors to defer paying capital gains taxes on an investment property when it is sold, as long as another similar property is purchased with the profit gained by the sale. This strategy can be particularly powerful for real estate investors looking to grow their portfolios without immediate tax liability.

How to Secure Tax Savings Through Real Estate Ownership

The Role of Real Estate in Estate Planning

Incorporating real estate into your estate planning can also offer tax advantages. Properties passed to heirs through estate planning can benefit from a step-up in basis, meaning the property's cost basis is adjusted to its market value at the time of inheritance, potentially reducing capital gains taxes if the heirs decide to sell.

How to Secure Tax Savings Through Real Estate Ownership

Understanding How to Leverage Your Real Estate

Real estate offers a variety of ways to optimize your tax situation. By understanding and utilizing these tax strategies, you can significantly enhance your financial health and ensure you're getting the most out of your property investments. Remember, consulting with a tax professional is always recommended to tailor these strategies to your personal financial situation.

Learn more about how you can leverage your home to help improve your finances. Schedule a consultation.

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Holly Morphew AFC®, Award–winning financial coach, author, global speaker, and multi-generational entrepreneur
Holly’s own journey to eliminating $67k in debt in her twenties, reaching financial independence in her thirties, and creating 11 streams of income are what inspire her to help others live their wealthy life.
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