Real estate tax benefits with seperate high income sources?

3 Replies

Hi there BP members hope you are all well today. I have a few issues that I am getting large differences of opinions on. I make over 100k a year at my current job and wanna get into rentals on the side to eventually get out of working for "the man" if you know what I mean. With my income that high and being single I am already taxed ridiculously here in ga. Will getting into real estate hurt me in my overall tax picture. I have talked to a couple of small town cpa's. One says there are many tax benefits to owning real estate even with my income and others say I won't see any benefit or possibly negative! I really love the idea of rentals but man it's hard to stay motivated with all the negativity around you not only from people you know but even some professionals in certain businesses. But I'm here so obviously I'm not letting them discourage me. I will make my own way and make my own future. Thanks in advance for any help. I know this is a long read but searching the forum I didnt see much on discussions like this. 

@Joseph Watson Welcome to BP! 

The CPA you spoke to was right, there are tremendous tax benefits for what the IRS calls "real estate professionals" The basic criteria is twofold: 

1) you must engage more that half of your 'working' time in real estate related activities. 

2) You must spend at least 750 hours involved in RE.

What is considered real estate involvement? Straight from the IRS website:

A real property trade or business does any of the following with real property:

Develops or redevelops it. 

Constructs or reconstructs it. 

Acquires it. 

Converts it. 

Rents or leases it. 

Operates or manages it. 

Brokers it.


Stay focused, and try to surround yourself with positive people. There is a lot of that around here.

@Joseph Watson

First, tax implications are about the least important consideration when getting into rentals. The #1 reason is generating wealth thru appreciation, and the #2 is generating passive cash flow. Taxes are a distant #3.

That said, you normally have tax benefits from rentals. You can have a low-tax or even tax-free cash flow from renting, and often you can have tax losses that would reduce taxes on your salary.

These benefits start getting squeezed out when your income is above $100k, but they still exist.

What @Yonah Weiss mentioned is an advanced loophole for people with high income, however you will not be able to use it as long as you have a full-time job. 

Regardless, you will still have tax benefits, just maybe reduced. And there're other tax benefits that I did not mention. It definitely won't "hurt" your taxes.

This site and you guys are freaking amazing! Thanks for all the information I live in a small town but my goals are much bigger sometimes small town people and businesses just dont understand!