DSCR Loan Tax Benefits: Deductions, Depreciation & 1031 Exchanges
Updated: October 4, 2024•12 min read•By Capital Bridge Solutions Team
DSCR loans offer significant tax advantages for real estate investors. From mortgage interest deductions to depreciation benefits and 1031 exchange opportunities, understanding these tax strategies can dramatically improve your investment returns and reduce your overall tax burden.
Key Tax Benefits of DSCR Loans
1. Mortgage Interest Deduction
100% of mortgage interest is tax-deductible on investment properties
- Deduct all interest payments from rental income
- No limit on investment property interest deductions
- Applies to both purchase and refinance loans
2. Depreciation Benefits
Depreciate property value over 27.5 years (residential rental)
- $500K property = ~$18K annual depreciation deduction
- Bonus depreciation for renovations and improvements
- Cost segregation studies can accelerate deductions
3. Operating Expense Deductions
All rental property expenses are deductible:
- • Property taxes
- • Insurance premiums
- • HOA fees
- • Repairs & maintenance
- • Property management fees
- • Utilities (if paid by owner)
- • Legal & professional fees
- • Travel to property
4. 1031 Exchange Strategy
Defer capital gains taxes indefinitely by exchanging properties
- Sell property and reinvest proceeds tax-free
- Build wealth faster by deferring taxes
- Works perfectly with DSCR loan refinancing
Maximize Your Tax Benefits
Get expert guidance on tax strategies for DSCR loan investments. Consult with your tax advisor and our lending team.