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Tax, SDIRAs & Cost Segregation

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Edgar Jimenez
  • Flipper/Rehabber
  • Bay Area, CA
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Can I offset my W2 Income through Negative Rental Income?

Edgar Jimenez
  • Flipper/Rehabber
  • Bay Area, CA
Posted Dec 7 2022, 20:36

After depreciation, maintenance, property taxes, and insurance, I am technically losing money on this year's rental income (only rented my property during Q4). Can I offset my W2 income with this loss or would my net rental income be $0?

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Alex Fenske
  • Residential Real Estate Broker
  • Mokena, IL
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Alex Fenske
  • Residential Real Estate Broker
  • Mokena, IL
Replied Dec 8 2022, 03:32

Generally you cannot deduct passive losses against active income and instead have to carry-forward the losses. Under certain circumstances you may be able to deduct $25k against active income, and if you meet the IRS definition of a "real estate professional" then you can deduct unlimited passive losses against active income. More info is here, but please ask a CPA. 

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Natalie Kolodij
Pro Member
  • Accountant
  • Charlotte, NC
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Natalie Kolodij
Pro Member
  • Accountant
  • Charlotte, NC
ModeratorReplied Dec 8 2022, 08:22

If your AGI is under $100k you can deduct up to $25,000 of rental losses against your w2 income. 

If your AGI is over $100k and below $150k, you can deduct some,  but it phases out. At $150k you can no longer deduct and those losses flow forward. 

If your rental is a short-term < 7 day stay and you materially participate, you can deduct losses as it qualifies as non-passive 

If you're a real estate professional per IRS status you can deduct losses as well sicne they're non-passive. 

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Replied Jan 17 2024, 19:49

"If your AGI is under $100k you can deduct up to $25,000 of rental losses against your w2 income."

is this with the up to 25k deduction or without it