Real estate professional expenses used as deductions

Raleigh, North Carolina
General Real Estate Investing
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Real estate professional expenses used as deductions

Amy Cox
Member since 2025 · 1 post · 1 vote

Hello, I am a high earner (260k/yr). My partner is a real estate professional. My question is: if we marry this year, can the expenses made via his s-corp as a real estate professional be used as deduction on out taxes (married filing jointly)? Or will expenses made via an scorp cant be counted as deductions on married couple taxes? Or do I need to ask a tax accountant? Thank you!

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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    11mo

    This is one of those situations where hiring a CPA may save you much more money than what the CPA charges.  I recommend you find a CPA that understands how to do taxes for real estate investors.

    Generally S-Corps are pass-through entities, so I suspect his losses could off-set your W2 income.  On the other hand, it is unusual to be using an S-Corp.  Most real estate investors use LLCs. It is worth digging into the details with a professional.

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    11mo

    It may be beneficial to have a conversation with his accountant or your accountant as they will have all the details.

    If your partner is a real estate professional, that turns rental losses from passive to active.

    Therefore, if he has rental losses, they will offset your W-2 income along with income from his S-Corp(K-1 + Wages).

    Best of luck!

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  • Aaron ZimmermanBusiness Member
    Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
    11mo

    You will absolutely want to talk with a cpa on how real estate professional status applies to your situation. You're asking the right questions - now you need to find the right cpa to ask those questions to. There's a lot of great CPAs on here so I'd recommend reaching out to a few and see who you connect well with.

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  • Elealeh Fulmaran
    Specialist · Member since 2025 · 483 posts · 270 votes
    11mo

    Short take: If you file married jointly, you generally report both of your incomes and losses together, but S‑corp expenses are deducted on the S‑corp return and flow through to you via the K‑1, not as separate personal deductions. What can offset your W‑2 income depends on whether the losses are passive or non‑passive, your partner’s real estate professional status, and material participation rules. This is exactly where a tax pro earns their keep; ask a CPA or EA to review your S‑corp books, K‑1 treatment, and whether losses can offset your high earner income this year.

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  • Fulton Abraham Sanchez
    CPA| New Clients Welcome| 50 States · Member since 2016 · 440 posts · 94 votes
    11mo

    @Amy Cox, hi. You’ll file one joint return, but S-corp expenses don’t get “added” on Schedule A, they must be deducted inside the S-corp and flow through on the K-1. 

    Make sure your partner uses an accountable plan. If your partner qualifies for REPS and materially participates (and you elect to aggregate rentals if needed), rental losses can be non-passive and offset your W-2—subject to basis/at-risk limits. 

    Right structure = big difference.

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    11mo

    Hey Amy! Congrats on the potential upcoming marriage and diving into real estate planning together.

  • Like others have mentioned above, since your partner runs an S-Corp, the business expenses aren’t deducted directly on your joint return. They’re reported on the S-Corp’s tax return. The net profit or loss then flows through to your joint taxes via a Schedule K-1.

    Since you said your partner qualifies as a real estate professional and assuming they meet the participation rules, some of those losses may even offset your W-2 income, which can be a game-changer. However, real estate should not ever be in an S-Corp because you lose the ability to take key tax benefits like depreciation and pass-through losses, which can increase your overall taxes.

    Another point to consider: S-Corp owners can pay themselves a reasonable salary, which affects payroll taxes and how much profit flows through. Properly balancing salary versus distributions can help optimize both taxes and cash flow, something many people don’t think about until later.

    Because S-Corps and real estate professional rules can get tricky, it’s definitely worth checking in with a CPA who understands both real estate and pass-through entities to make sure you’re maximizing deductions and staying compliant. If you don't have one, lots of great professionals on here who can help! Happy to connect!

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