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Tax, SDIRAs & Cost Segregation

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Denis Z.
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Private lending - investment vs business income

Denis Z.
Posted Jan 17 2024, 20:42

Hi everyone,

I am having a challenge understanding requirements for qualifying PL as a business income as opposite to investment income. I have W2 job and just starting in real estate. I have LLC registered for all of my activities that include (supposed to include) rental, fix&flip, etc. as well as private lending. On private lending side marked myself as PL, reviewed about 20-40 projects with lending requests this year, and got income from 4 notes. Not much income from other activities in 2023 (I just started). I have expenses related to REI business and ideally would like to see hem to be used against my PL income. All the posts I read on the BP forum suggests that my PL income can be qualified as business income, but in discussions with my CPA I am just stuck at "it is an investment income, you can't sue it to offset your REI business expenses". Any chance someone can help me to understand what do I miss?

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