Real Estate Investor vs Dealer-Huge Difference!

September 18th, 2023 at 10:39 AM

I have great news! You can have in your real estate portfolio both investor and dealer properties. This distinction is significant for tax purposes.

Here’s a snapshot of the potential tax differences:

Suppose you profit $90,000 from a property sale:

That’s a potential savings of $24,597 in taxes for investors!

You look at every property individually to determine its classification and make sure you identify each property in your records as either an investment or dealer property. Not doing so can lead to complications with the IRS, and believe me, you don’t want to rely on the IRS for “mercy.”

How the courts determine your classification:

On the other hand, if your goal with a property is appreciation or rental income, it’s considered an investment property.

Remember, each property’s classification is determined independently. So, whether it’s you or your corporation, owning both dealer and investor properties is possible.

Mark S. Fineberg, CPA

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