W2 Tax Deduction with a Syndicate?

Question

I was introduced to the world of passive real estate investing through syndications and there are many benefits that to continue to be shared, including bonus depreciation. I’m new to this world so I don’t fully understand all the rules and benefits but as someone who isn’t a real estate professional, And my spouse isn’t either, so we still receive tax benefits from Investing in a syndication? I think it’s obvious that those with professional status benefit More, but how helpful is it for someone who only has w2 income outside of the syndication investment? I understand this isn’t the appropriate place for specific tax advice but general information would be appreciated.

Michael Plaks · Answer

@Albert Rothe

Here is your answer: https://www.biggerpockets.com/forums/51/topics/839015-are-sy...

and, even more technical: https://www.biggerpockets.com/forums/51-tax-legal-issues-con...

Randy Rodenhouse · Answer

You will only be able to use the depreciation against passive gains since you're a W2 employee.  It won't offset your earned income. If you were a RE professional then you can deduce but becoming a RE pro with a full time W2 is next to impossible.  Note: you don't lose the depreciation since it just keeps rolling forward year after year. So, if you make a big gain when that syndication sells, you'll be able to offset some of that.  Also note that below $100k of W2 income you can deduct up to 25k in passive losses (it is a little more complicated since phase out between 100-150k income).

Basit Siddiqi · Answer

First - It depends on what type of 'syndication' you are invested in.A syndication is just the pooling of money together to purchase a business, operate a business, buy assets, etcThe elections that the partnership makes along with the type of assest that the syndication buy are what give the investors their tax advantages.Therefore, if the syndication buys real estate, you are getting the tax benefits of owning real estate.If the syndication owns notes, you are getting interest income(no real tax benefits)if the syndication owns equity, your income is taxed at lower rates if they are qualified dividends.In general, you are likely to be considered passive when it comes to your ownership so losses(if any), may be limited unless you can claim some sort of status.

Albert Rothe · Answer

Thank you.  so will I be able to deduct my quarterly payments while being part of the syndicate?and if I’m correctly understanding you, I will be able to deduct total profit after (maybe) 5-7 years if all goes well.  Is that right?

regarding the $100k, is that single or married amount and is that net or gross?   am I hearing you correctly that $25k can be deducted based on this income level even as a non real estate professional?  This sounds like a quality benefit for people who earn this amount of w2 income compared to higher w2 earners, unless I heard you wrong.

W2 Tax Deduction with a Syndicate?

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