W2 employee with a rental property looking for future tax advice

[William White]

Hi,

Here is my situation. I am NYC based with a solid W2 job in tech and I own one out of state rental property. As I am sure you could guess I pay an insane amount in taxes every year. I am looking for ways to reduce my tax bill outside of traditional strategies for a w-2 employee (Max 401k, HAS, etc). I do really like my job and don't plan on being a full time entrepreneur

Would love to connect. I have explored ideas like starting an LLC, doing a cost segregation on my property, short term rental loophole, etc.

[Stephen Nelson]

@William White, you can use real estate related losses to shelter your W-2 income.

The big obstacle here is Section 469 tax law which says two things super relevant to your situation. One that you can't use passive losses to shelter your nonpassive income... Two that the general rule for real estate is it's considered passive.

Thus, the two obvious tactics to consider:

1. Talk your spouse into becoming a real estate professional so real estate rentals aren't for you automatically passive. (You guys will still need to materially participate.)

2. Invest in something like an STR that ironically, isn't considered real estate which means all you need to do is materially participate. (That can be done with a few hours a year if carefully structured.)