Why are there such great tax advantages for owing and investing in real estate? Our nation’s tax laws are written to support those people — business owners and investors — who create jobs and housing. The laws benefit the risk-takers, the doers, who spur the economy. Therefore, if you invest capital into your community by buying real estate, you are rewarded with tax breaks so that you can maintain and continue investing while, at the same time, you provide a much needed social service.
As well, the government learned its lesson a generation ago that it does a very poor job of providing low-cost housing. The old joke that there is nothing more permanent than temporary government housing arose from these past and unsuccessful efforts. In some cities, such as San Francisco, the municipal government still owns large housing complexes. They are the most mismanaged rat traps around. All in all, the private sector just does a much better job of it, which most governmental agencies now keenly recognize. Accordingly, it is more efficient to encourage individual investors through tax advantages to perform this service than for the government to muddle its way through the important community need of housing.
The government also allows special tax and legal protections for property owners in the form of legal entities. How you hold your property and use your entities becomes very important as your investments increase.