Tax Prep: A Quick Benefit To Owning Rentals

As an aspiring CPA, I thought it would be good to share one of the great benefits of real estate. If you own rental properties, you may be able to deduct passive losses against your earned W2 income—up to $25,000! Here's how:

If you actively participate and your adjusted gross income (AGI) is below $100,000, you can deduct passive losses from rental activities.
The deduction phases out between $100k and $150k (50 cents for each dollar over $100k), and you're required to own more than 10% of the property.

If you want to take it further, you can use 26 CFR §1.469-9(g) to elect as a real estate professional. This election allows your real estate activities to not be treated as passive, potentially opening up even more deductions. To qualify:

More than 50% of your personal services across all trades/businesses must be in real estate.
You must perform 750+ hours in real estate activities where you materially participate.

This strategy could save you significant money on taxes as you build your portfolio!

[NOTE] You should consult a professional regarding this subject matter.

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