Tax implications of only rental income (loss)

2 Replies

I currently have W2 income and rental property income. My rental properties, between expenses, depreciation and mortgage interest, amount to loss on my taxes. I am able to deduct that loss from my W2 income, since I am within the income limits to deduct passive loss. That takes a little bit off my taxes, which is great.

My question is if I decided to quit my W2 job, so my only income was rental properties, how would that affect my taxes? Logic is telling me since I have a loss today, that my taxable income would be nothing.

I am filing married with dependents, do would there be an opportunity to even get money back?

Sorry if this is a basic question. I have lived in the W2 world since I was 14 years old, so that is all I know.

@Joe Splitrock

Even with W-2, you can deduct only 25k of rental loss if you are active in the Rental. 

If you quit, you would deduct the same 25k unless you work in the RE business enough to qualify as RE professional. Then there is no limitation on the Rental loss. 

You do not get money back just like that.  Very simply put, If you had tax withheld throughout the year from W-2 ( or made required estimated payments based on the projected NI if no W-2)  and at the end, you have a loss, then you get money back what you had previously paid.  What I meant was just having loss does not give you money from GOV. 

You carryforward that loss next few year when you have an income to pay less tax or no tax at all. 

There are few refundable credits, if applicable, where you actually get money back, but not significant enough and you have had to have a loss to get the money. 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here