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Investing In The Go Zone
Unique Post-Katrina GO Zone Tax Shelter Advantage

Until the end of the 2009 tax period, a special Katrina GO Zone depreciation allowance lets you depreciate half of your rental property acquisition costs in the first year. This provides enormous tax savings. Upon sale or transfer, this depreciation allowance can be applied to income taxes paid in the previous five years, allowing many investors to reclaim much of the taxes they have paid during that period.

Congress passed the Gulf Opportunity Zone Act of 2005 to reward investors who assist in the creation of housing in the coastal states that suffered so much destruction due to Hurricane Katrina. Many consider it to be the most remarkable tax incentive in modern history. Later, the legislation's benefits were extended to victims of hurricanes Rita and Wilma. Later still, they were extended an additional year.

The key point to understand is that the GO Zone Act immediately rewards investors who help rebuild certain effected areas with a depreciation allowance equal to half the cost of acquisition for each unit bought. Moreover, it extends the “carry back” upon sale or transfer to income taxes paid over the prior five years with no maximum limitation. This means that a home bought in 2009 and sold in 2010 can be used to get a refund of taxes paid as far back as 2005.

For investors with incomes less than $100,000 a year, a single property bought in 2009 usually reduces taxable non-passive income by the maximum $25,000 in the first year of the investment -- with the excess applied to future income. Upon sale or transfer, these depreciation write-offs can be used to recover taxes paid on all income without limitation in the previous five years. For individuals with incomes between $100,000 and $150,000, the loss limitation is reduced $1 for every $2 in income above $100k with the excess or unused loss carried forward until exhausted or until the property is sold or otherwise transferred. At that time, all accrued losses can also be carried back 5 years.

Even without the GO Zone incentives, however, normal depreciation write-offs completely protect your rental profits from taxes and should allow you to pay off 30-year mortgages in less than half their scheduled term. EquityBuild, of course, will provide you with all the accounting information necessary to get these tax benefits. We also provide a list of qualified CPAs who specialize in the GO Zone depreciation allowance. 		 
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