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Tax advantaged investing can be a terrific way to reduce your taxes. Although many of the tax-advantaged strategies have gone by the way side, there are still real estate partnerships that offer benefits.
Real estate partnerships are varied, of course, but two of the more common ones are low-income housing and historic rehabilitation. You can get great tax credits from the federal government for building or rehabilitating low-income housing and for investments in the rehabilitation or preservation of historic structures.
Participating in a real estate partnership has many advantages. These partnerships may provide opportunities for tax-advantaged income and long-term capital appreciation. The tax credits generated by these partnerships can be used to offset your income tax liability on a dollar-for-dollar basis. This can make them much more valuable than tax deductions, which help reduce your taxable income, not the tax you pay.
These credits are subject to certain limitations, and the rehabilitation tax credit begins to phase out for taxpayers with adjusted gross income (AGI) greater than $200,000 ($100,000 if married filing separately) and is completely phased out when AGI reaches $250,000 ($125,000 if married filing separately).
As long as they are suitable for your situation, these tax-advantaged investing strategies can be one way to help reduce your income tax liability. A financial professional can help you determine whether such investments would be an appropriate strategy for you.
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