There are several strategies to minimize your tax bill as a property investor. From maximizing tax deductions to accounting for depreciation, utilizing a 1031 exchange and many others, you can generate wealth and grow your portfolio by taking advantage of tax incentives and opportunities.

Another such strategy real estate investors should consider if they want to take advantage of tax incentives is how they structure the ownership of their properties – whether as an individual or as an entity, such as a limited liability company (LLC), partnership or S-corporation. Entity structuring can offer further tax benefits and mitigate risk as an investor, but it’s not right for every investor. Here’s what to know.

Choosing the Right Structure for Your Goals

 The decision between individual and entity ownership ultimately depends on your goals, risk tolerance, and the size of your real estate portfolio. Consulting with a real estate attorney and tax professional is crucial to determining the best ownership structure for your specific situation.

As you assess your options, here are some things to consider.

  • Entity ownership involves purchasing and owning real estate through a legal entity like an LLC, corporation, or trust.
  • Some of the biggest pros of entity ownership include asset protection (your personal assets are typically shielded from lawsuits or financial troubles related to the property), tax benefits (entities often provide more tax advantages and deductions), and scalability.
  • Drawbacks of entity ownership include administrative complexity and associated costs, as well as potential loss of control if you share decision-making with other members.

On the other hand, individual ownership is generally more straightforward and still provides favorable tax benefits. At the end of the day, the most advantageous structure for you is the one that best aligns with your goals, so do your research and consider all your options before settling on a structure.

For more about investing in Ohio real estate and the associated tax implications, get in touch with our team at RL Property Management.