A Huge Write-Off Is Not the Same Thing as a Usable Write-Off

[William Thompson]

Ever since 100% bonus depreciation came back, I’ve had more investors call me excited about big paper losses.

My first question is always the same:

Can you actually use the loss?

Because a deduction and a usable deduction are not the same thing.

A lot of rental real estate losses are still subject to passive activity and at-risk rules. So yes, the write-off may be real, but that does not automatically mean it helps you this year the way people on the internet make it sound.

That’s why I keep telling investors the same thing:

Do not buy for the deduction first.
Understand the deal.
Understand your income.
Understand the structure.

Sometimes the answer is yes, this is a smart tax move.
Sometimes the better answer is slow down.

Curious how many investors here have heard a tax strategy sound amazing until someone asked one simple question:

Can I actually use the loss?