Buy and hold tax benefits?

Question

What are all of the possible tax deductions when claiming a rental property? And assuming I have a rental property paid off, and I have a W-2 job, do I save money on both taxes? Or one or the other? Also is there any other important information a new buy and hold investor should know about?

Kelly O'Keefe · Answer

@Isaiah Cuellar

I think there are several strategies you could use. I would look into Cost Segregations, STR Loophole, Material Participation, and Active vs Passive Income. I think once you have a general idea of these topics you can start to understand how your income is being taxed and then develop a strategy to maximize your rental property.

However, without knowing a little bit more it is hard to give you a direct answer. So I will agree with Account Closed and say "It depends"

Basit Siddiqi · Answer

If you have a fully paid off vehicle, you won't have the mortgage interest deduction that other taxpayers will have.There is no 'both taxes', there is one income tax form that includes all your income.You will report your rental income and wages on one tax form.

Ko Kashiwagi · Answer

Hi Isaiah,

Property deducted expenses from your rental property can reduce the taxable income generated by the property. Buy and hold rental income is generally considered a passive investment income unless you are a real estate professional. Losses from passive activities typically cannot offset active income (W-2). This is a major reason some W-2 employees get into STR, as managing STR could classify you as a real estate professional with enough activity. With that being said, it's probably advisable to use a tax professional on this topic!

Isaiah Cuellar · Answer

Got it, thank you!

Buy and hold tax benefits?

Most Popular Reply