How much of business expenses can I write off?

Question

Hi all, I have a W2 job and this year I started buying SFH rentals under my LLC. How much in business expenses can I write off? Is there a limit? Thanks.

Michael Plaks · Answer

You posted a question that sounds simple but it is not.

1. Need to be clear about what "business expenses" mean. Some items may be deductible right away, others may be deductible later, and some may not be deductible at all. No way to explain all this in a forum post.

2. Need to be aware of timing. Expenses before you purchased your first property may not be deductible, because you did not technically have a business yet. Business starts not when you form an LLC but when your first property is ready for occupancy. And if you bought properties that needed work before being rented, it gets even more complicated.

3. Even if an expense is deductible and your business has already started, you may run into income-based limitations, as Joshua explained.

Sorry, this stuff is not intuitive. You either need to do a good amount of self-study or hire one of us tax professionals: https://www.biggerpockets.com/forums/51/topics/1222774-expla...

Joshua Thompson · Answer

Hi Victor,

I'm going to assume this is a long-term rental, you actively participate, and you own 100% of it in your LLC. Depending on your W-2 income, the losses produced from this rental property will only be able to offset, at most, $25,000 of your W-2 income. As your income increases over $100,000, assuming you're not married filing separately, that $25,000 amount will decrease. Once your income is at or above $150,000, that $25,000 will most likely be reduced to $0.

To know exactly how much the rental may or may not benefit you, it would be beneficial to speak with a tax professional. There are some great tax professionals here in the forums. There are also many posts related to this that could help you.

@Jaycee Greene thank you as always sir!!

Jaycee Greene · Answer

Hey Account Closed. He's an accountant in Dallas that works with a lot of real estate investors.

Cameron Jones · Answer

Hey Victor, Michael put it excellently. It just depends. If the business is operational (ie. Rental properties are placed in service) then just about anything that's ordinary and necessary. If the business is still "starting up" (ie. Rental properiee still in the scouting phase, not closed yet, and not placed in service) these expenses likely cannot be expensed and have to be capitalized until your placed in service date. Then there's loan/finance charges, you can't just deduct finance charges such as origination fees, appraisal fees, and other charges associated with loan acquisition because these have to be amortized over the life of the loan. There are a lot of other nuances via IRS codes. It's so important to have a concise bookkeeping and accounting system set up. Excel sheets alone can be tough, recommend QuickBooks with a solid Chart of accounts tailored to REIs

Basit Siddiqi · Answer

You can write off 100% of your business deductions as long as they are ordinary and necessary.

The next question is how much of my rental losses can I offset against my other forms of income such as wages, interest and dividends.

Best of luck!

Josh L. · Answer

@Victor N. EVERYTHING! I joke but the tax code is set up to deduct everything "ordinary and necessary" for your business. seems simple but that's where it gets difficult as the tax code is complex defining all the exceptions, exclusions, exceptions to the exceptions for that broad umbrella of "ordinary and necessary"

good question and definitely worth getting squared away while 2025 is still open.

Account Closed · Answer

On YouTube check out Jasmine DiLucci, JD, CPA, EA. I personally use Engineered Tax Services. Throwing my pearls here for you hopefully you will appreciate lol

Ashish Acharya · Answer

Account Closed

When investing in rental properties through your LLC, you can deduct a variety of business expenses that are ordinary and necessary for managing and maintaining the properties. These deductions can significantly lower your taxable income, but it’s important to ensure your expenses meet IRS guidelines. There’s no strict limit on deductions, but you need to keep accurate records and follow the rules to avoid any issues with the IRS.

Here are the key deductions you can claim:

• -Mortgage interest is fully deductible.
• -Property taxes are deductible in full.
• -Repairs and maintenance costs, such as fixing leaks or replacing appliances, are deductible.
• -Utility payments for tenants are deductible if you pay them.
• -Fees for property management are deductible.
• -Depreciation is deductible over 27.5 years; 100% bonus depreciation is available for certain assets.
• -Legal, accounting, and other service fees are deductible.

There’s no cap on deductions, but passive activity loss rules may apply if your expenses exceed income. If you qualify as a real estate professional, you can avoid some limitations. Make sure to keep your W-2 income and rental income separate on your tax return for accuracy.

By staying organized and consulting with a tax professional, you can maximize your deductions while staying compliant.
This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Benjamin Louie · Answer

Account Closed No real limit, you can write off anything that’s ordinary + necessary for running your rentals (repairs, insurance, mileage, management fees, etc.). Just keep good records and make sure it’s legit. A CPA who works with real estate investors is 100% worth it, especially early on.

Benjamin Louie · Answer

Account Closed No real limit, you can write off anything that’s ordinary + necessary for running your rentals (repairs, insurance, mileage, management fees, etc.). Just keep good records and make sure it’s legit. A CPA who works with real estate investors is 100% worth it, especially early on.

How much of business expenses can I write off?

How much of business expenses can I write off?

Most Popular Reply

17 Replies