RE tax benefits with W2 income

Tax, SDIRAs & Cost Segregation
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RE tax benefits with W2 income

Arjun Rao
Member since 2024 · 3 posts · 6 votes

Hi all, 

My spouse and I have a full time W2 jobs and we are looking into real estate investment (SFR - buy and hold strategy for now). Neither of us will be able to get the real estate professional status nor will we be able to make use of the STR loophole. I recognize we will not be able to offset active W2 income, but if we do purchase an investment property that has some net positive cashflow, what are the types of tax benefits/offsets we can get?

Thanks for your help! 

Arjun

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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
2y

The benefit is that your net positive cash-flow will not be taxed assuming depreciation covers it, which is likely will.

[email protected]917-280-8544
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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    The benefit is that your net positive cash-flow will not be taxed assuming depreciation covers it, which is likely will.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
    View Page
    3Reply
  • Account Closed
    Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes
    2y

    In addition to the response above, any excess losses incurred can be used to offset other similar types of passive income. 

    1Reply
  • Arjun Rao
    OP
    Member since 2024 · 3 posts · 6 votes
    2y

    Thanks for your help! 

    1Reply
  • Todd AndersonPro Member
    Real Estate Agent · Cape Coral, FL · Member since 2023 · 392 posts · 175 votes
    2y

    There is also a chance to offset more tax liability by using a cost segregation on the rental property.  This will front load the depreciation that can be utilized to offset taxes.  Many of the investors that I work with use this strategy to lessen the tax load.  it works even better with new construction rentals.   

    [email protected]651-492-5652
    0Reply
  • Raj Kon
    Member since 2024 · 1 post · 0 votes
    2y

    Does cost seg study offset any w2 income or passive income only? New to RE investing and trying to learn

    0Reply
  • Todd AndersonPro Member
    Real Estate Agent · Cape Coral, FL · Member since 2023 · 392 posts · 175 votes
    2y
    Quote from @Raj Kon:

    Does cost seg study offset any w2 income or passive income only? New to RE investing and trying to learn


     That is a bit of a complicated question.  It depends on your tax bracket and Real Estate status.  I would always say check with your tax professionals.  this would be for any real estate depreciation, whether you use Cost Seg or not.

    [email protected]651-492-5652
    0Reply
  • Account Closed
    Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes
    2y
    Quote from @Arjun Rao:

    Thanks for your help! 


     Happy to helP :D

    0Reply
  • Lawron Ballard
    Member since 2023 · 7 posts · 1 vote
    2y
    Quote from @Raj Kon:

    Does cost seg study offset any w2 income or passive income only? New to RE investing and trying to learn


    This is dependent on the treatment of your rental activity. The other piece to consider with cost segs is the value of the property evaluated and savings generated vs. the cost of the study. Additionally, those suspended losses will offset any gains on the property when sold. 

    0Reply
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