1099 Main Income - Can I offset it with my rental expenses

Dayton, OH · Member since 2018 · 21 posts · 6 votes

Can I deduct my rehab expenses from my 1099 wage earned at work, to offset my high income? I make 93$/hr (193K a year) on my 1099 and my wife makes around 95000 a year salary. I also purchased a rental home and I am going to end up spending 20-25K in rehab costs. Hopefully more this year. Im looking for ways to keep my taxable income low, and my monthly cash flow high by leveraging my real estate business.

Neither are in an LLC, both are just in my own name. Can I mix and match income and expenses since technically I am working for myself in both situations, half my time at my tech gig and half my time doing real estate investing?

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Natalie KolodijBusiness Member

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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes

Nope Sure can't.

Rental income and expenses are recorded on Sch E.

It's passive income. Passive losses can only offset passive income (Unless your AGI is under 150k, phase out begins at 100k- or unless one of you qualify as a RE Professional- which if you both have full time jobs isn't very likely)

So your potential passive losses from the Rental will carry forward until there is a time with passive income, and then it will reduce that.

Also, much of those renovations to get that rental ready to rent will need to be capitalized. Added to the building value and depreciated over the life of the rental, not expensed all at once.

I would recommend reaching out to a tax professional to help you maximize tax strategy.

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Natalie KolodijBusiness Member
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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
7y
Nope Sure can't.
Rental income and expenses are recorded on Sch E.
It's passive income. Passive losses can only offset passive income (Unless your AGI is under 150k, phase out begins at 100k- or unless one of you qualify as a RE Professional- which if you both have full time jobs isn't very likely)
So your potential passive losses from the Rental will carry forward until there is a time with passive income, and then it will reduce that.
Also, much of those renovations to get that rental ready to rent will need to be capitalized. Added to the building value and depreciated over the life of the rental, not expensed all at once.
I would recommend reaching out to a tax professional to help you maximize tax strategy.
Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies
Kolodij Tax & Consulting
Website View Page
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Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
7y
@Steven Morris
Generally speaking, real estate investments cannot reduce taxes on your high 1099/W2 income.
You might get cash flow from your rentals without increasing your taxes, but you will not decrease them.
Look at your rentals as long-term wealth accumulation, not a tax shelter.
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Eamonn McElroy
Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
7y
@Steven Morris
"Can I mix and match income and expenses since technically I am working for myself in both situations, half my time at my tech gig and half my time doing real estate investing?"
Agree with @Natalie Kolodij and @Michael Plaks here. Generally for tax "activities" are reported by "trade or business." You can't mix and match.
At that gross revenue level, it's very possible an S election and/or a Solo 401k make sense. Ask your tax pro.
"1099 wage earned at work"
Are you an IC or a statutory employee? This matters for my preceding sentence.
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Justin WindhamPro Member
Banker · Nationwide · Member since 2015 · 4k+ posts · 1k+ votes
7y
@Steven Morris
I agree with @Eamonn McElroy. If you don't have a Solo 401k plan, you might want to look into one. You could potentially save a lot in taxes and develop a nice real estate portfolio (or other assets) in a tax-deferred account.
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