Updated over 13 years ago on . Most recent reply
Too high income to take RE tax deductions?
Does none know if there is n income level at which you are not allowed to take tax deductions fom RE? Ex. If you are a high income W2 employee and want to start investing in RE. How does he 86 tax law effect you? Can you get around the restrictions is entity structure, etc?
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As a passive investor with active participation you are allowed to take up to a 25K loss against ordinary income. There are limits to what a passive investor though is allowed to deduct in the current year though. When your AGI is 100K or more you start to be disallowed $1 of loss for every $2 of income. Which means that at 150K no loss against ordinary income is allowed.
Active participation doesn't mean managing the property yourself it can mean making some of the decisions. As long as you are active in some of the decisions you quite likely will be considered active.
You can get around the 25K limit and the high income limitations if either you are your wife is considered a real estate professional. Typically this is very difficult for a husband and wife that work two full time jobs. It can be quite manageable though when one spouse doesn't work or is employed only part time.