Tax, SDIRAs & Cost Segregation

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Amby Bhagtani
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Offset W2 with depreciation

Amby Bhagtani
Posted Nov 24 2022, 11:43

For people who are on a W2 what would be the best way to negate W2 income (including stocks?)? Is this possible with long term multi family real estate?

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Ashton Karp
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Ashton Karp
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  • Bonney Lake, WA
Replied Nov 24 2022, 19:39
Quote from @Amby Bhagtani:

For people who are on a W2 what would be the best way to negate W2 income (including stocks?)? Is this possible with long term multi family real estate?

My understanding is that depreciation losses are capped at 25k for offsetting earned income unless you qualify as a real estate professional, then you aren’t capped and can use those passive losses to lower your earned income tax liability. I’m sure someone else can qualify and elaborate on that. 

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Michael Plaks#1 Tax, SDIRAs & Cost Segregation Contributor
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Michael Plaks#1 Tax, SDIRAs & Cost Segregation Contributor
  • Tax Accountant / Enrolled Agent
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Replied Nov 24 2022, 19:52

@Amby Bhagtani

Read this thread: https://www.biggerpockets.com/...

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Becca F.
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  • San Francisco
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Becca F.
  • Rental Property Investor
  • San Francisco
Replied Nov 25 2022, 10:51

@Amby Bhagtani

I have a W-2 job and I'm not a real estate professional. My rental properties (3 properties with 2 SFH, 1 multi-unit) don't negate my W-2 income but I get a small federal tax refund vs. owing the IRS just based on my W-2 salary (where I could just take a standard deduction) since I'm itemizing all my deductions. The rental expenses and depreciation (over 27.5 years) reduce my taxable income with my rents received but it definitely doesn't cancel out my salary. The third property didn't start getting rented out until this year so that wasn't on my previous tax returns.

I'm not a tax expert so it would be best to consult with a CPA or other professional and also talk with experienced investors who own multiple properties. 

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Amby Bhagtani
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Amby Bhagtani
Replied Nov 25 2022, 13:20
Quote from @Becca F.:

@Amby Bhagtani

I have a W-2 job and I'm not a real estate professional. My rental properties (3 properties with 2 SFH, 1 multi-unit) don't negate my W-2 income but I get a small federal tax refund vs. owing the IRS just based on my W-2 salary (where I could just take a standard deduction) since I'm itemizing all my deductions. The rental expenses and depreciation (over 27.5 years) reduce my taxable income with my rents received but it definitely doesn't cancel out my salary. The third property didn't start getting rented out until this year so that wasn't on my previous tax returns.

I'm not a tax expert so it would be best to consult with a CPA or other professional and also talk with experienced investors who own multiple properties. 

 Thank you Becca. The other thread that @Michael Plaks recommended is awesome. I still hear rumblings of short term rental allowing for tax deductions for high income W2. 

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Basit Siddiqi
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Basit Siddiqi
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Replied Nov 26 2022, 09:45

Potentially yes if your income is below $150,000 or if you can claim Real Estate Professional Status.