The question of which will be more tax-advantageous for you comes down to this: it depends. I know, I know, that sounds like a cop-out. But the truth is, the tax advantages of any investment are largely dependent on the overall income of the property owner. While each approach offers some advantages, how ownership of either type of property will impact your bottom line is something you should discuss – and discuss carefully – with a financial advisor or tax professional. Here are a few – and just a few – of the tax implications to consider:
While you own the property
When you sell the property
Unless your name is followed by the initials CPA, this can all seem pretty confusing, which is why the opening paragraph of this piece recommended seeking answers specific to your situation from a reputable financial advisor. Whether you’ll derive a greater benefit from owner-occupied or investment property is entirely dependent on your individual circumstances.
Finally, here are a couple of other things to remember: An investment property is just that – an investment. No matter how many property-related shows you’ve watched on HGTV or TLC, you should approach an investment property purchase with the same emotional detachment you’d have if purchasing say, energy stocks, and make sure it fits your overall investing strategy and portfolio; any analysis should include multiple factors – not just taxes. Likewise when buying a home to live in, you need to look beyond the potential tax advantages and consider how it will suit your needs, both now and for the entire time you plan to live in it.