USA – IOWA Law and Practice Contributed by: David M. Erickson, Christopher S. Talcott, Amy S. Montgomery and Shannon M.H. Hasse, Dentons Davis Brown PC
8.5 Tax Benefits Real estate investors benefit greatly from utilising depreciation deductions from their federal and state tax returns. While this creates additional gain on the eventual sale of the real estate, tax benefits such as 1031 exchanges can defer the recognition of that gain for long periods of time. Additionally, financing costs are generally amortised over the life of the loan and many operational costs can be deducted currently, further reducing an investor’s taxable income. Depending on the nature of a development, real estate investors may be able to utilise state and federal tax credits programmes – such as historic, low-income housing, brownfield or new market tax credits – to reduce the investors’ tax burden or reduce develop - ment costs by sale of the benefits of the tax credits to outside investors.
Utilisation of these programmes typically requires a co-ordinated approach from start to finish among an experienced team of legal counsel, tax and account - ing specialists, investor diligence professionals, state and/or federal agency representatives, and engineer - ing and design professionals to ensure compliance with detailed regulations, as well as a proper struc - ture to ensure that the intended benefits accrue to the intended parties.
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