One of our School of Tax Strategy students from Canada asks the following question about investing in real estate in the U.S.

Q: Is it possible to engineer a rental property investment so that it has positive cash flow and zero taxable income?

A: Most definitely. In fact, if you are leveraging properly (as much leverage as possible with a rate lower than your cap rate), then you should never have taxable income from an investment in U.S. real estate even if you have positive cash flow. The reason is the high depreciation deduction (capital cost allowance) that you receive on real estate. The best thing you can do to ensure no taxable income is to do a cost segregation on the property. A cost segregation breaks down the property into four categories - 1) land 2) building 3) land improvements and 4) building contents. You need a CPA (U.S. equivalent of a CA) or an engineer to do the cost segregation.

If you are thinking of investing in real estate in the U.S., be sure to contact us at 866.467.5809 and we will be happy to share with you some thoughts about how to structure your investment and get the most tax benefits available.

Warmest regards,

Tom