Real Estate Tax question

[Arif Siddiqi]

Just had my 2018 taxes done, it was my first year as real estate investor and for better part of the year, I was working to increase my real estate knowledge base by attending both paid and unpaid seminars, reading real estate books and blogs; subscribing to tools and obviously getting BP pro membership. I am fairly good in bookkeeping and recorded most of my real estate biz expenses in my tax spreadsheet. I am also running a online distribution biz and that’s how I learned to keep track of my biz expenses and mileage. I didn’t buy any properties in 2018 but now I have 5 cash flow rental properties that I brought during last couple of months. To my utter surprise, my CPA didn’t allow me to deduct any of my real estate expenses from my W2 income although he deducted expenses from my online distribution biz without any issue. His assertion was that as I am not a licensed RE agent, I can’t deduct any training or tools expenses in 2018 considering I don’t have any RE based income in 2018, however once I have rental income to report in 2019 taxes, then all these expenses can be deducted. My question is if my CPA got it right as it caused me about $1000 of additional Fed taxes in 2018 that I could have saved otherwise.

[Michael Plaks]

@Arif Siddiqi

This is not about income, guys. This is about having properties ready and available for rent. You had none in 2018, so you did not yet have a business.

Think about it this way. Your restaurant is not open for business until it's ready to serve customers. Even though you have expenses way before the grand opening.