Taxability of income from unrelated real estate activities

5 Replies

Hi,

If I have income and losses from different real estate activities (e.g rental loss and trust deed income), can the loss from rental business be offset against the income from trust deeds? If that matters, lets assume they are all being done by personal name and not under single/multiple LLCs.

Thanks

schedule E is income/expenses by property (A,B,C,etc). although it doesn't matter that you cant insert trust deed income into a schedule E b/c it's taxed as ordinary income. Your losses on the rental from schedule E will go to offset ordinary income (subject to certain ceilings based on AGI). Since trust income is treated as ordinary in an indirect way your rental losses are offsetting.

You will also want to keep in mind that as long as you can considered yourself a "real estate professional" and you have an overall loss (hopefully not!), your losses can be deductible.  You will want to ensure you are meeting the requirements to be a real estate professional, therefore making the losses deductible.

Coty -if you have passive activity losses on Schedule E as a non real estate professional then refer to my original post. If you are a pro refer to Ben's post-- your losses are fully deductible. -Mark

Thanks Mark and Ben for the replies. As of now, I don't qualify for real estate professional so I know the rental loss isn't deductible against my W2 income. Since both my rental income and trust deed income come from passive real estate activities, I just wanted to make sure the loss from rental can offset the income from trust deed. I read that if the AGI is above 150k then the loss allowance is reduced to zero, does that mean I have to pay the marginal tax rate on the trust deed income no matter what my losses are on rental?

Sorry, I just re-read Mark's first post and realized that the trust deed income is not eligible on Schedule E, so it can't be offset against losses reported on that form. For all practical purposes its the same as my W2 income, so the rental loss doesn't matter as long as I'm not qualified as real estate professional or have AGI above 150k. Thanks again.