So I just found out that the loss ($9,500) I showed from last year's real estate syndication investment ($25k) was useless on my return due to the fact that the IRS disallows the use of this passive loss if AGI is >$150k. I understand it starts phasing out at AGI of $100k.
This got me to thinking, how do all these real estate investors take advantage of paper losses to defer taxes? ...do they all meet the real-estate professional status (REPS) or is there something for us non-REPS out there?
...it is my understanding this AGI limitation does not apply if it is a business that invests, which leads to the question: If I had made that investment from my LLC instead of personally, could that loss have been used to reduce the business' taxable income?
Would love to speak with an accountant familiar with the matter and enlist some tax planning services or consulting.
Accountant · McKinney, TX · Member since 2023 · 393 posts · 580 votes
2y
Unfortunately, real estate and taxes together have plenty of nuances and technicalities and the passive loss limitation rules can be tricky. Many syndications market the deductibility of losses and will disclose in their PPM”s to speak with your tax advisor as they do not know their investors situation (beyond Accredited Investor assertions) and will disclaim providing legal or tax advice. If I had to venture an educated guess @Michael Plaks can share some literature that is relevant and helpful.
@Steffen Vater - no, LLC would not have changed anything. You cannot benefit from syndication losses. They will eventually be unlocked when the syndication completes its cycle and sells.