chapter  5
21 Pages

The taxation of property investment

ByCraig Furfine

Chapter 5 of Practical Finance for Property Investment explores the taxation of investment property income. Starting from the recognition that investors may be most interested in understanding how much after-tax cash flow they will receive from a particular investment, the chapter describes the calculation of taxable income as well as taxable capital gains. It further examines the distinction between taxes due upon sale that arise from price appreciation and those that represent depreciation recapture. The chapter also discusses opportunities to defer capital gains taxes by using 1031 exchanges and by investing in opportunity zones. In conclusion, the chapter presents a case study illustrating the impact of taxation on the returns from investing in a residential property in London, which illustrates that although the tax rules regarding real estate may differ across jurisdictions, the principle of determining after-tax income from property investment is universal.