My mom says she can’t utilize tax write offs on her real estate?

4 Replies

Hello!
My mom owns 5 rental properties. She is telling, me since her and my stepdad make over $150,000, she cannot utilize tax write offs until they sell the property. She is claiming that the write offs will  be used to offset the capitol gains tax when they sell. 
Is there a way for her to utilize the tax advantages of real-estate through the 30 year ownership?
What happens if she never wants to sell and pass it down to kids? 

How can the tax advantages still be used? 

Surely there has to be a way, as Brandon and David use the advantages and they make way more money! 
pls help. Thank you! 

Originally posted by @Greyden Piechnick :

Hello!
My mom owns 5 rental properties. She is telling, me since her and my stepdad make over $150,000, she cannot utilize tax write offs until they sell the property. She is claiming that the write offs will  be used to offset the capitol gains tax when they sell. 
Is there a way for her to utilize the tax advantages of real-estate through the 30 year ownership?
What happens if she never wants to sell and pass it down to kids? 

How can the tax advantages still be used? 

Surely there has to be a way, as Brandon and David use the advantages and they make way more money! 
pls help. Thank you! 

Does she qualify as a real estate professional? Please read more on this. If she is not a full-time employee, she can plan to use the losses going forward.  The losses that are already limited can be used to offset future net passive income or at disposal or death. The suspended passive losses will be released when she files her final return when she passes away (sorry to be morbid). But if her CPA does a good job, her investments can be structured to utilize these losses before death or disposal. 

 

@Greyden Piechnick

She is correct, as long as she or her husband do not qualify as "Real estate professionals" (may not be able to) and do not use advanced tax planning strategies (requires a case-by-case guidance from a tax professional).

@Greyden Piechnick She can write off expenses and depreciation on schedule E. If she is losing money after expenses and depreciation she cannot write off the losses against her income but must keep track of the losses and roll forward...but most people earn money from real estate after a few years. They sell if they keep losing money. So might look at selling now rather than keep feeding an alligator, if that is the case.