Vancouver · Member since 2013 · 159 posts · 6 votes
Hi,
I was wondering what the best way to shield W-2 income from rental properties is? How much of a taxable loss could I create on a slightly positive cash flow property?
Also, does anybody have any experience of qualifying as a real estate professional when they have a regular W-2 job? I know the rules are strict, I was just looking to see if anybody was willing to share their experience in doing so. Thanks.
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Hi Taylor. Not sure exactly what you mean by shielding W2 income, but in general the expenses, including depreciation and mileage and random things, used as write-offs should balance out the income earned from rentals (i.e. create a good bit of taxable loss). So in theory there should be no effect on your W2 income from your rentals. Even if your expenses don't produce enough write-offs to be totally tax free, it should only dig into your rental income and not any W2 income.
Qualifying will be tough. I'd recommend keeping a log of the exact RE hours you work because you'd have to prove 750 or more. Plus I believe you would have to work more RE hours than the those from another job, so you'd have to be working 41 hours/week in RE on top of your full-time job. Won't be easy.
I was wondering what the best way to shield W-2 income from rental properties is? How much of a taxable loss could I create on a slightly positive cash flow property?
Also, does anybody have any experience of qualifying as a real estate professional when they have a regular W-2 job? I know the rules are strict, I was just looking to see if anybody was willing to share their experience in doing so. Thanks.
A truly good rental property won't show a loss even for tax purposes. When you deduct all of your rightful costs it should still show a profit if it is a good rental.
That said, if you have a full time job you WILL NOT qualify as a real estate professional unless you are engaged in the trade or business of real estate in that job. You would have to document that you spent 2,081 hours with your rentals.
We have several posts that discuss this topic, A quick search will show you the wealth of information that many of our members have compiled.
-Steven