BUSINESS OWNER AND REAL ESTATE INVESTOR TAX HELP

5 Replies

So I left my CPA's office today feeling a little down. I thought that I had some legal loopholes that would help my business out using Real Estate.

Here is the scenario: I have two commercial buildings. One houses my business and the other is empty. I wanted to rent the empty one to my business for $3500.00 a mo. $1500 would go to pay PITI and $2000.00 would go to me.

I can do this but there arent any real tax advantages on the 2000.00 portion

I thought the extra $2000.00 would be a savings because it would be taxed as passive income and not earned income. Turns out that tax laws have changed and there is a P.I.G. law that wont allow me to do this.

Can anyone expound on this?

Is there anything that I can do here to lessen my taxes?

Aren't you able to depreciate the property, which would shield some of that rental income?

Originally posted by @Travis Elliott :
I thought the extra $2000.00 would be a savings because it would be taxed as passive income and not earned income. Turns out that tax laws have changed and there is a P.I.G. law that wont allow me to do this.
Can anyone expound on this?

Is there anything that I can do here to lessen my taxes?

@Travis Elliott ,

That income can only be used to offset the income from that building due to the fact that it is a part of your principal business.

Passive income and Earned income have the sale rates. now if you business is a sole proprietorship it will be taxed subject to SE tax; however, otherwise it is Just ordinary income rates.

The category of passive only affects the fact that losses can be limited.

Medium hta logoSteven Hamilton II EA, Hamilton Tax and Accounting | [email protected] | (224) 381‑2660 | http://www.HamiltonTax.Net

Thanks Steve.

My business is a S-corp. So I can rent it to my company triple net and wright off the mortgage utilites etc but nothing more I guess

Originally posted by @Travis Elliott :
Thanks Steve.

My business is a S-corp. So I can rent it to my company triple net and wright off the mortgage utilites etc but nothing more I guess

That pretty much sums it up. You do get your depreciation. The income is taxed exactly the same as ordinary income.

Medium hta logoSteven Hamilton II EA, Hamilton Tax and Accounting | [email protected] | (224) 381‑2660 | http://www.HamiltonTax.Net