Which of the following is an example of an income tax advantage for investors?

Depreciation allowances represent a significant income tax advantage for investors because they allow investors to reduce their taxable income. Real estate investors can take advantage of depreciation by writing off the cost of the property over a specified period, usually 27.5 years for residential properties and 39 years for commercial properties. This reduction in taxable income can lead to lower tax liabilities, providing a financial benefit that enhances cash flow.

In contrast, the gradual payment structure of loans is more about managing cash flow during the loan repayment period than providing direct tax benefits. Fixed rates on mortgages offer predictability in payments but do not inherently provide tax advantages. Similarly, a contract for deed is a method of purchasing real estate that can impact the payment structure and ownership transfer but does not offer the tax benefits associated with depreciation. Thus, the ability to deduct depreciation from taxable income is a well-recognized advantage specifically associated with real estate investments.