Business for landlord

[William Lackey]

Wife and I flipped our first property in 2020. Recently purchased a duplex and we will rent both units. What kind of business can I start to take advantage of tax deductions. My wife and I are both W2 employees and make about 200k. Neither one of us have our real estate license. What kind of in-home business (relating to rentals/real estate) could we start to take advantage of tax deductions. Thank you in advance for helping out some rookies!

[Bob Norton]

@William Lackey Rental real estate is a business.  You can deduct any reasonable and customary business-related expenses for your rental business, including mileage, travel, meals and a home office.  You will need to document the business purpose for your expenses (usually writing a contemporaneous note on the receipt or your bank statement will do).

You can setup an LLC for your rental business if you want. LLCs are good for liability protection. They have no affect on the amount of deductions you can take for your business.

Since your wage income is above $150k, you will not be able to write off any rental losses.  However, your losses will be suspended and carried forward to offset rental income in the future.

You could consider getting a real estate license as @Karen O. mentions.  This would be a separate business from your rental business.  

However, you do not have to be a real estate agent to be a real estate professional under tax law.  A real estate professional as defined under tax law allows you to write off rental losses with no income limitations.  However, claiming yourself a real estate professional with a W-2 job can be problematic due to the rules for qualifying.  Talk with your CPA if you want to claim yourself as a real estate professional.