Can depreciation be written off against your paycheck

Question

can depreciation from a rental property be used against paycheck income?

Colleen F. · Answer

@Brandon Hall  I think there isn't much risk of that happening....

In any event that explains it, have to calculate when quitting the day job makes sense.

Brandon Hall · Answer

@Colleen F. Simplifying the tax code would stump my business's growth! Can't have that happen :)

You are correct when speaking in terms of being classified as a real estate pro for tax purposes. However, there is another element meant to help the smaller taxpayer who doesn't qualify for the real estate pro classification.

If your Modified Adjusted Gross Income (MAGI) is below certain thresholds ($150k if married filing jointly) then you can write off a certain amount of your passive losses against your ordinary income. Unfortunately, you are phased out of the loss allowance once your MAGI exceeds $150k.

Just wanted to clear that up.

David Hayman · Answer

I agree Brandon , my feeling is we need to take every deduction we can and to aggressively arrange our behavior to pay the lowest taxes possible if we don't it hurts our cash flow and growth

David Hayman · Answer

what is the qualification of a full time investor? You could easily spend 60 hours a week looking and making offers when your day job is fourty hours .

David Hayman · Answer

it would be great if you could expand on this brandon I think there are a lot of us out there that are getting started that could benefit from have an exta deduction against income to use toward the next rental property.

Colleen F. · Answer

@Brandon Hall I am not a full time real estate professional or an accountant so writing the depreciation and expenses  against my w-2 income in my day job my accountant has said is not okay. You have to spend more time on real estate then the day job.  Passive losses against passive income.  (I don't feel like this is a passive situation , but that is another issue).  If you are saying for those of us who do not get paid for our W-2  by real estate can write  this off against our day jobs I stand corrected and I will ask but that is my understanding.   If only the tax code was downsized it would make me so happy...

Brandon Hall · Answer

@Colleen F.

Might be nice, However you can't carry losses/depreciation  over to your W-2 income.  Check with your accountant but that was done away with years ago.

Do you mind citing your source here? You certainly can write off passive losses against ordinary income so I'm curious as to what you are referencing. Maybe I missed something recently.

@David  Hayman you will have to find a CPA that is competent whose practices align with the level of risk you are willing to take on. Maybe you want to take on risk while your CPA tends to be risk averse - that will cause problems in the future as the CPA won't take deductions even if you are entitled to them.

David Hayman · Answer

thank you, I love getting new ideas from other people my CPA always seems to be working for the IRS and their best interest not mine. Are most CPAs like that? How can you do it ,not you can't do it?

Colleen F. · Answer

Might be nice, However you can't carry losses/depreciation  over to your W-2 income.    Check with your accountant but that was done away with years ago.  We have carried over losses from year to year  but can only write them off against rental income.  W-2 income is different , the government takes their chunk regardless.  after a certain point there is not much writing off to be done.

David Hayman · Answer

thanks after reading Brandon's article on depreciation when you first get started the phantom loss would wipe out the net income of the property . It would be great if you could  carry it over to lower your w2 income.

Can depreciation be written off against your paycheck

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