All Forum Posts by: Sean Nelson

Thanks for the excellent info! I knew my thinking was too good to be true!

One more question to fully clarify and hammer my question home. I did read where passive "losses" can only be used for passive income. But Im not necessarily referring to "losses".
Im simply asking if the deduction for depreciation "expense" from my real estate investments can be used to offset my earned income from my non-real estate businesses on my individual tax return? 
To clarify further. Lets say I make $100k from Sean's Moustache Grooming Salon. But I have 25k in depreciation expense from all of my real estate investments (and to simplify things, lets say all of my RE investments are exactly break even)
In this scenario, is my taxable income $100k or $75k?
I think you already answered this but I wanted to sharpen up my question just to be sure.

Ok another hypothetical scenario. Lets say I sell all my businesses and enter the wonderful world of passive real estate investing full time. This time, i buy a property or portfolio of properties that is worth $7,562,500. But this time, it actually cash flows $275k a year. Under this scenario, I make a good $275k in income but dont pay any taxes on it?

@Bonnie Griffin Kaake  Im curious as to why a RE pro would want to convert their properties from passive to active? Are you saying that you can only use cost segregation if you are an active participant? Or are you saying that RE professionals are the only group of individuals who have the ability to offset their "active" income with passive losses?

@Don Konipol I was under the impression that when you sell the property, depreciation recapture can only be maxed out at the gain (profit) that you make on the property. Further, I thought depreciation recapture is taxed at 25% (not ordinary income). In addition to the depreciation recap, you would also have to pay cap gains tax of course.
 Therfore, I think as long as you are making a gain on the property, you should be able to accept any offer. Of course the taxes will definetely reduce your gross profit, but the taxes should never make a scenario in which you are incurring a net loss. 
Am I thinking this right?

Newbie here. Im fascinated with the depreciation aspect of real estate and I have a question.

Lets say I own a few different non-real estate related businesses. And my earned income from those businesses equals about $275,000.

Now lets say I buy real estate for the sole purpose of achieving a depreciation write off which equals about $275,000/yr. This means I would have to have a real estate portfolio or a single property with a value of $7,562,500. Assuming im understanding tax law correct, i could write off $275,000 each year because $7,562,500/27.5 = $275,000
Lets just assume the real estate property doesnt even cash flow. I just break even.

So in simplification purposes, I would be paying no taxes right?
$275,000 in earned income - $275,000 in depreciation = $0 in taxable income?

Is this all above correct, or is there some limit Im missing out on? Is there ever a maximum amount of Depreciation that I can use to offset my earned income? For example, lets say I make $1,000,000 in earned income each year, but I have $1,000,000 in depreciation