All Forum Posts by: Paul Allen

Yes, you are crazy.

Your plan might still work, though.

I am also crazy. A crazy fee-only, fiduciary, CFP ®. You can find me on NAPFA and XYPN if you want. I'm also an enrolled agent (You can find me on the NAEA website if you want), so I am grinding long hours on tax returns for the next month. Call me in May and see if I know anything about REI. :)

Best of Luck with Your Real Estate Investing!

Why are you paying an accountant who can't give you the help you require? Find a tax pro who meets your needs.

Best of Luck with Your Real Estate Investing!

@Mauricio A. the costs you mention result in passive activity losses associated with the passive activity of generating rents. (One of my favorite oxymorons of the tax code, since most landlords I know are working their tails off for that passive income!)

In plain English you might call them 'repairs' but in tax English those are typically betterments/imrovements, so they are capitalized and added to the depreciation expense you claim on Schedule E. Which for you seems like it would be suspended passive loss.

You can take the deduction for suspended passive losses when one of the following occurs:

1. Your AGI goes below $150K (losses deducted limited to $25K)
2. You sell the property
3. You have gains from passive activities

High earners can sometimes realize a positive tax impact when they sell the property. If your top marginal tax rate was 32% and you sold a property with suspended passive losses, you would write them off at a 32% tax savings. You'd have to pay tax on the accumulated depreciation (assuming the property did not actually depreciate in value), but the payback on that is capped at 25%. Thus, you could get a 7% return on the tax arbitrage. 

I'm not advocating buying or selling real estate just to exploit this (or any) tax loophole. Nor can I say for certain if your specific facts and circumstances make you eligible for it - you should talk to your tax pro about your situation. I just like to point out that suspended passive losses are not all doom and gloom! 

Best of Luck with Your Real Estate Investing!

Passive Activity Loss Limitations are calculated on form 8582.

https://www.irs.gov/pub/irs-pdf/f8582.pdf

No, but you can claim the suspended passive losses from 2010 - 2017 on this year's tax return.

Also a Financial Advisor...

You can do-it-yourself without 'winging it'.  Check out bogleheads.org

Best of Luck with Your Investing!

If you're truly fortunate, one day you realize the point is not to win the rat race. The point is to not be a rat.

Best of Luck in All Your Endeavors!

Welcome to BP.

Have you considered a municipal bond fund? It may not fit your individual definition of 'little to no risk', but the income is not taxed by the federal government.

Depending on what you want the money for in the future, have you considered a retirement account or a 529 account?

Best of Luck!

The city or county where real estate taxes are paid will often have a website with those values posted. 

IRS estimates 32 hours to learn + prepare?  Maybe if you're only doing DCN 7/107s.

Good golly I hate that form!

Welcome to BP!  Best of Luck with Your Real Estate Investments!