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Does your first rental really save you on taxes?
With the standard deduction being 24k (or so) for married couples will one single family rental save us on taxable W2 income? I just purchased my first property and plan to BRRR it so it will have 20k or so worth of rehab (I plan to recoup that on the refi obviously) but how much can I really expect to gain tax wise with this property in the first year?
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Natalie Kolodij
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Standard vs. Itemized deductions relate to schedule A, these are for you personally. You get this with or without a rental.
Rentals go on Schedule E. All expenses and income goes here.
If the net of those items on Schedule E create a Loss - you can potentially use that loss to offset your w2 income.
If your Adjusted Gross income is under $100k you can deduct up to $25k of losses annually.
If youre AGI is over $100k-$150k you can deduction a more limited amount of those losses
If your AGI is above $150k you can not deduct any losses, they CAN offset other passive income sources if you have them, or they carry to the next year and will do so until you are in a position to use them.
Rentals go on Schedule E. All expenses and income goes here.
If the net of those items on Schedule E create a Loss - you can potentially use that loss to offset your w2 income.
If your Adjusted Gross income is under $100k you can deduct up to $25k of losses annually.
If youre AGI is over $100k-$150k you can deduction a more limited amount of those losses
If your AGI is above $150k you can not deduct any losses, they CAN offset other passive income sources if you have them, or they carry to the next year and will do so until you are in a position to use them.
Kolodij Tax & Consulting