All Forum Posts by: Paul Allen

Not to get all Zen on you, but your disappointment is a function of your unmet expectations.  You can either adjust your expectations or find a CPA that meets the ones you have.  I recommend the latter, then discuss those expectations with him/her in advance.

Best of Luck on Your Real Estate Investing.

No, that's not how it works. 

Your taxable income from rental activities is the revenue generated minus the expenses. One of your expenses each year will be depreciation. Your buildings and the improvements you made to them are depreciable assets. The Internal Revenue Code specifies the depreciation period for residential rental properties is 27.5 years. Therefore, the depreciation expense you can deduct on $200,000 of rental real estate is going to be about $7,273 ($200,000 / 27.5). You add that to your other expenses for the year (insurance, real estate taxes, mortgage interest, utilities, repairs, cleaning, etc.) to get your total expenses and then subtract your total expenses from your rental revenue to get your taxable income from real estate activities.

Best of Luck with Your Real Estate Investments!

If your average rental period is short (less than 30 days) and you provide significant services to your tenants, then your income from your rental properties is deemed to be not passive and would be subject to SE taxes. 

Everyone qualifies for the passive income loss. Sometimes that loss is suspended, but you still get it. You just have to wait until you have more passive income or you sell the property to claim it. 

Tom Brady got suspended for 4 games and then came back and won the Superbowl. He was still valuable, and so are your passive losses when they get suspended. (OK, that's a really awful analogy, but hopefully it helps people remember that suspended passive losses aren't a horrible thing.)

Best of Luck on your Real Estate Investing!

@Matthew Hite if the Roth IRA is more than 5 years old you can withdraw anything you have contributed without tax or penalty. You can't withdraw any earnings without a penalty, but the contributions you made were taxed before they went in. You can take them back out. Just leave any earnings alone.

https://cashmoneylife.com/roth-ira-withdrawal-rule...

True. I got a bit sloppy with my terminology. 

The mortgage interest for OP's personal residence is a Schedule A personal deduction. The mortgage interest for his rental properties is a Schedule E business deduction. If I am understanding correctly,  OP wants to borrow more money on his business properties to pay off the loan on his personal residence.  Interest tracing rules do not allow deducting interest as a business expense if the money was borrowed for personal use. It doesn't matter what collateral is used to secure the loan, it matters what the money is used for. In this scenario it is being spent on a personal residence and therefore not deductible on Schedule E.

@Emil Matov - welcome to Bigger Pockets.

Paying off your personal residence is a personal expense. You can't claim a business deduction for personal expenses. The interest on the refinance loans on your business properties that was used to pay off your personal residence would be subject to interest tracing rules.

I like the creative out-of-the-box thinking, but in this case it would not be a legal business deduction.

Best of Luck with Your Real Estate Investments!

@Miranda M. where did this extra 2017 money come from? Is it taxable income? 

You may also want to wait until the tax reform frenzy has passed. The recently proposed bill seems to be removing some or all of the self-employment tax exclusion on rental income. If that becomes law it could significantly change the math for some real estate investors.

+1

Define the destination and the vehicle to get you there becomes much more obvious.