All Forum Posts by: Andrew Strauss

Hi David - You can deduct all expenses (including depreciation) related to your rental property. In case your expenses are more than your income, you come under PAL rules. But if you can't claim loss (as you might not qualify) under that, you can carry it forward and deduct it in the future against your rental income.

To deduct expenses, there is no requirement to create LLC and all. You create LLC for asset protection and has nothing to do for writing off expenses.

Hi Jazmin - While TurboTax can handle basic rental income, a CPA would add insight, especially for a first-time rental with mixed uses like yours and even explore tax strategies tailored specific to you. Since you’re renting out partially, a common method is to use the square footage of the rented areas relative to the total property space. I don't think you can claim home office deduction for W2 income.

Hi Becca - Here’s a quick breakdown:

PALs generally can’t offset W-2 wages or investment income (like dividends and interest). Why the IRS doesn’t consider stock or index investing as passive is a separate discussion.

Many investors go for STRs and use accelerated or bonus depreciation to offset W-2 or ordinary income. The "STR loophole" allows them to treat rental income as non-passive if they meet material participation and other requirements.

Can an STR unlock PALs from LTRs? No—LTR PALs can only offset passive income, so an STR's non-passive losses won't absorb them.

Cost seg studies and bonus depreciation depend on each person’s tax situation; they’re not only useful for REPS. It’s all about individual tax planning.

Hi Jhamari – Setting up ownership through an LLC could be one of the approach, though there are more variables to consider it. This is more of a tax planning matter, so it would involve working through several specific questions to tailor it to your situation.

Hi Joe - For a single-member LLC, the IRS disregards the LLC as a separate tax entity which means no capital gain impact on transfer.

Hi John - Under the passive activity loss (PAL) rules, you can deduct rental losses against passive income. The $12,000 profit from Rentals 1 and 2 would be offset by the $15,000 loss from Rental 3.Hence, the $3,000 loss cannot be deducted against your other income because your AGI exceeds $150,000. This loss will be carried forward. 

Yes, you can do it. But remember this is not straight forward as the basis of the new property is derived from the adjusted basis of the relinquished property plus any amount you paid.

Hi Heidi - When you sell a property, the IRS requires you to "recapture" the depreciation you’ve taken on that property but by doing a 1031 exchange, you can defer not just capital gains tax but also depreciation recapture tax.
If you believe apartment complex is a good investment, with the 1031 exchange process, this can be a beneficial strategy.

Hi Ujwal - Yes, interest will be deductible as the funds are being deployed towards the other rental properties.

Hi Michael - You will be subject to UBIT to the extent of debt involved in the syndication.