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Real Estate Investments and Taxes What You Need to Know - Bridgecoin Blog Featured Image

Real Estate Investments and Taxes: What You Need to Know

There are several reasons why you may desire to invest in real estate. Owning property may provide income through appreciation — when the value of the home rises over time — and passive income if you rent it out. It’s also an excellent strategy to diversify your investment portfolio.

However, before diving into this, you need to understand the fundamentals of real estate investments and taxes.

What taxes are subject to real estate

With real estate investments, you pay a lot of tax. Depending on your situation, these can change. However, these are the primary five to remember:

  • Property taxes – These are often based on the property’s assessed value, including the land, structures, and other improvements. Property tax rates differ substantially based on your city and state.
  • Capital gains tax – Depending on your purchasing method, you may need to pay capital gains tax when selling or buying a home. The tax rate on most net capital gain is no higher than 15% for most individuals.
  • Business income tax – This only occurs if you offer more than basic services. For example, buying a house and turning it into a bed and breakfast.
  • Real estate income tax – Rental income from real estate is considered passive income and is taxed like regular income.
  • Net investment income tax (NIIT) – Interest and dividends are two forms of investment income generated by real estate. If you are a higher investment earner, you will have to pay NIIT, which the IRS imposes at a 3.8% rate on certain net investment income.

As you can see, real estate investment tax exists. Whether buying or selling a home, these are the five you’ll want to remember.

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How different real estate investments are taxed

Real estate investing tax works similarly to most tax systems. So you can get a visual representation of how it works, here are some popular examples:

  • Rental property – Rental income is subject to taxation at the same rate as other regular income, such as job-related salaries. Depending on the total amount of your taxable income, the federal income tax rate might range from 10% to 37%.
  • Real estate investment trusts (Reit) – REIT dividends are typically non-qualified dividends that are taxed the same as regular income. A capital return is not taxable income but lowers your investment basis, resulting in more significant capital gains when you sell your REIT shares.
  • Real estate limited partnerships (RELPs) – You may generate rental income and capital gains through RELPs. In this business arrangement, there are two partners: a “general partner” who accepts liability and a “limited partner” who is a hands-off investor. A RELP is not obliged to pay taxes, but a Form 1065 with the IRS to record all revenue must be submitted.

How can Bridgecoin help?

Above are the basics behind real estate investments and tax. At first, it’s confusing. However, the more you involve yourself in the investment style, the more you’ll feel comfortable

At Bridgecoin, we want to mitigate the challenges faced with real estate investing with cryptocurrency. To obtain a more thorough understanding of how we can help, contact a professional today.

Cryptocurrency and Real Estate The Future of Investing - Bridgecoin Blog Featured Image

Cryptocurrency and Real Estate: The Future of Investing

Recently cryptocurrency and real estate have formed somewhat of a relationship together. With the standard benefits of blockchain tokens, like faster transaction times and safety, it’s clear why.

The trend to invest in real estate with cryptocurrency has only begun. However, we can see this changing the market forever with further adoption and adaptations. 

What is cryptocurrency in real estate?

When we discuss cryptocurrency in real estate, we’re referring to how the property is purchased. In this circumstance, the investment is actioned with a cryptocurrency, like Bitcoin.

For example, if you own $500,000 worth of Bitcoin, you can purchase a $500,000 property. Therefore, you transfer this digital asset into something physical and cash-flowing, which is a perfect opportunity for most investors.

How will cryptocurrency benefit real estate investments?

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Worldwide, the adaptation of cryptocurrency has been phenomenal over the last few years. At the moment, one in five US adults hold crypto, and we still remember that many thought these currencies were a fad. But now, it’s considered humanity’s future.

It just makes sense when you utilize cryptocurrency and the blockchain with real estate. It eliminates many unnecessary practices and offers some excellent benefits for investors:

  • Fraud protection – The blockchain may be used to avoid fraud by generating a private, fully certifiable digital ID. This provides a more current and dependable verification of money than a bank letter. Therefore, whether you’re purchasing or selling, you can prevent fraudulent practices in real estate.
  • Boosts transparency – Buyers and sellers may securely and promptly save their information, eliminating the need for lengthy negotiations with banks and attorneys (thereby saving money and boosting transparency).
  • Deferring capital gains tax – Cryptocurrency is labeled a “capital asset,” according to the IRS. Because of this, you must pay capital gains tax if you trigger a taxable event. You won’t get charged this when you correctly invest in real estate with cryptocurrency.

These are only a small majority of the benefits obtainable for the usage of cryptocurrency in real estate. Undoubtedly, more will be discovered. But for now, it can help speed up the process, used as a capital gain tax deferral or as a method to eliminate fraudulent transactions.

Invest in real estate with cryptocurrency today

Without question, cryptocurrency is here to stay within the real estate market. However, effectively using it is problematic. Without the right knowledge, you can trigger a taxable event, resulting in unnecessary capital gains tax.

At Bridgecoin, we want to eliminate these issues and make investing in real estate with cryptocurrency accessible. We can help investors bridge the gap between crypto and real estate by using our four-step method:

  • Identify – We find the right real estate investment for you
  • Invest – We work with our crypto lender
  • Close – We purchase and manage the property
  • Save – You defer your capital gains by using our proprietary process with our partners

Investing in real estate with crypto has never been easier with our 4-step method. For more information about how we can help, talk to a helpful representative today.

Cryptocurrency Tax Rules The Complete Guide - Bridgecoin Blog Featured Image

Cryptocurrency Tax Rules: The Complete Guide

Nowadays, most cryptocurrencies are convertible to fiat currencies, meaning that they act as a medium of a store of value, a unit of account, exchange, and can get substituted for real money.

As a result, cryptocurrency is taxable. If you activate a taxable event, you’ll owe tax to the IRS. To learn more about the cryptocurrency tax rules and what they entail, see the following:

When is cryptocurrency taxed?

On their own, cryptocurrencies aren’t taxable. For the currency to be eligible for capital gains tax, you must have a taxable event. Such as:

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Taxable event

Non-taxable event
  • Cryptocurrency exchange for government-issued currency

  • Purchasing goods, services, or property with crypto 

  • The exchange of one cryptocurrency for another

  • Receiving coins that have been mined 
  • Purchasing cryptocurrency using fiat currency

  • Donating cryptocurrencies to a non-profit or charity that is tax-exempt

  • Making a cryptocurrency gift to a third party

  • Moving cryptocurrency between wallets
  • Example – With your cryptocurrency, you purchase a new car. If the crypto is at a higher value than when you brought it, you’ll trigger a taxable event. Therefore, you need to log the amount you spent and its fair market value during the transaction.
  • Example – You have recently brought some cryptocurrency and placed it into a digital wallet. You won’t need to pay any tax as it hasn’t triggered a taxable event.

Tax for cryptocurrency in the USA is determined by the cryptocurrency’s movement. If you trigger one of the above events, the IRS will require you to declare the crypto as capital gains.

Also note that cash loans can be made by a bank, an employer, or through peer-to-peer lending networks, and because they must be repaid, they are also not taxable. This in combination with optimized cryptocurrency investments yield best results for investors.

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How is cryptocurrency taxed?

Because the IRS considers cryptocurrencies as capital assets, they activate tax events when used as payment or when they’re cashed in. Therefore, you’ll pay capital gain tax if you sell, exchange, or use crypto that has an increase in value.

How much you’ll pay is determined by a few factors: the holding period of the asset, taxable income, and filing status. If you’ve held your crypto for less than a year and triggered a tax event, you’ll pay short-term capital gains tax (your ordinary tax bracket). In contrast, anything over a year will be long-term capital gain tax, which can be anywhere between 0 to 20%.

Crypto taxes act similarly to taxes on other assets or property. When they’re used, and gains are achieved, they generate taxable events for the owners.

Is it possible to avoid cryptocurrency tax?

Tax for cryptocurrency in the USA is somewhat confusing for many. When people are unaware of this, the IRS will issue an unexpected fine or penalty. Undoubtedly, you want to avoid this. But what if we told you there was a legal way to transfer cryptocurrency into real-life assets tax-free?

With Bridgecoin, it’s possible. Our organization’s skills are split between real estate and cryptocurrency. By specializing in both areas, we’ve developed a spectacular process that enables you to invest crypto into real estate, deferring capital gains.

If you’re holding unrealized capital gains and want to re-invest it into cash-flowing real estate tax-free, then we recommend contacting a helpful representative at Bridgecoin today. We utilize non-taxable cash loans in combination with unrealized capital gains to yield best results for investors.

Understanding Capital Gains Tax 101 Guide - Bridgecoin Blog Featured Image

Understanding Capital Gains Tax: 101 Guide

If you have shares, real estate, or even crypto assets, you might need to pay capital gains tax as each is declared “property” to the IRS. When understanding capital gains tax, you can defer the amount of tax paid. To learn more about this, you must have a fundamental knowledge of the charge.

What is capital gains tax?

Capital gains tax is tax paid by investors on the profit made for an asset sale. The amount of tax required by the IRS will depend on three factors: How long you held the asset before selling, taxable income, and filing status.

These taxes apply to what the IRS classifies as “Capital Assets.” Therefore, this can include investments like real estate, cars, boats, bonds, stocks, or cryptocurrency.

Your holding period, the time between the purchase and sale of an asset, will determine how much tax needs to be paid. These are categorized in two timeframes:

  • Short-term – is a tax on profits from selling an asset held for a period of less than a year. The tax rate on short-term capital gains is equivalent to your standard income tax rate, commonly referred to as your tax bracket.
  • Long-term – is a tax on the earnings made from the sale of a long-held asset (longer than a year). Depending on your taxable income and filing status, the long-term capital gains tax rates are 0%, 15%, or 20%. In general, they are lower than short-term capital gains tax rates.

As seen, understanding capital gain tax is essential for investors. Knowing this allows you to reduce the number of short-term investments (highly taxable) and transform them into long-term (less taxable).

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2022 capital gains tax rates

2022 capital gains tax is required for April 2023. If they’re in the long-term holding category, then you’ll need to pay the following rates.

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Tax-filing status

0% tax rate

15% tax rate

20% tax rate

Single

$0 to $41,675.

$41,676 to $459,750.

$459,751 or more.

Married, filing jointly

$0 to $83,350.

$83,351 to $517,200.

$517,201 or more.

Married, filing separately

$0 to $41,675.

$41,676 to $258,600.

$258,601 or more.

Head of household

$0 to $55,800.

$55,801 to $488,500.

$488,501 or more.

Please note this does not account for short-term capital gains because these are taxed as ordinary income. Therefore, in 2022, this could be either 10, 12, 22, 24, 32, 35, or 37 percent, depending on your income bracket.

Do you pay capital gains tax on crypto?

Although many look at crypto as tax-free, they’re wrong. In 2014, the IRS declared crypto as a capital asset, meaning it’s eligible for capital gains tax.

As you know, these taxes are only required from the profits once sold. For example, if you acquire $1,000 of cryptocurrency and then sell it for $1,500, you must declare and pay taxes on the $500 profit. However, if you buy and hold cryptocurrency, it isn’t taxable.

How to defer capital gains tax with crypto

In recent years, investors have made a considerable amount of their crypto investments. Though this is excellent, if you want to exchange it for a fiat currency, goods, or services, or even trade it with another cryptocurrency, you’ll trigger a taxable event and will then need to pay capital gains tax.

However, there are ways to defer capital gains tax on crypto. With our 40+ years of real estate knowledge and years of crypto understanding, we’ve paired them together to offer a new, revolutionary way of investing. By partnering with Bridgecoin, we can help you finance your crypto into cash-flowing real estate and defer your capital gains tax.

To learn more contact a professional representative today.