What are the tax benefits of owning real estate?

Owning real estate comes with several tax advantages that can significantly reduce your taxable income. Mortgage interest and property taxes are typically deductible for primary residences. For investment properties, you can deduct operating expenses, repairs, and depreciation, which spreads the property’s cost over its useful life. This often allows investors to report a lower taxable income, even if they’re cash-flow positive. Additionally, capital gains from the sale of a primary residence may be excluded up to $250,000 for individuals or $500,000 for married couples if you meet ownership and use tests. Real estate investors can also leverage 1031 exchanges to defer capital gains taxes by reinvesting in another property.