Interest income decreasing my paper losses

[Roger Pearce]

 I have 3 long term rental houses and I sometimes make loans to a local flipper. I am not a real estate professional - I have a real job! My tax guy keeps running the interest I make on the loans through my rental business, which eats up my paper losses. I have told him I would like to just run them through my personal taxes so that they won't use up my paper losses. He doesn't seem to understand that I am unnecessarily using up paper losses that are best saved to offset a passive profit later.

Am I missing something?

[Michael Plaks]

@Roger Pearce

It is not very clear what you're trying to accomplish that you believe is impeded.

Interest income is taxed at ordinary tax rates, the same as your W2 income. So your losses are offsetting your ordinary rate income - which is normally a good thing.