Ways to offset my W2 tax with my passive income

[Melissa Aguila]

Hello All,

I own 3 short term rentals that I self manage and I Also own another business where I earn my w2 income working full time.

My question is from my understanding, I cannot use my passive income expenses to offset my W2 income. They only way to do that is if i can prove that I spent 750 hours a year working on the str.

1) Is that the correct tax law?

2) I was thinking if I opened up a property management company, and put 3 rentals in that, would that be enough to prove the 750 hrs./year and would that be a good idea?

3) Do you have any other suggestion on how I can go about this.

Thank you for your time. I'm still quite new to realeastate investing and I'm still learning alot.

[Michael Plaks]

What you refer to is called a Real Estate Professional status which is not what you need. What you need is "material participation" which you might already have, based on your short description. But the only way to be sure is to have it examined by a competent accountant.

My concern is with your expectation of having losses from STRs, especially the self-managed ones. Normally they should cash flow well enough where they do not generate tax losses except for the first year in service when they might have large depreciation. Again, best to get a tax professional or an experienced STR operator to review your financials and your business plan.