Passive losses can only offset passive income—they don’t reduce your W-2 income in most cases.So while your duplex rental may generate losses on paper, they won’t reduce the amount of tax withheld from your W-2 unless:You qualify as a real estate professional, orYou materially participate in a short-term rental under 7-day average stays, orYou have other passive income to offset.What to do instead:Don’t stop your W-2 withholding entirely unless you’ve worked with a CPA to confirm a significantly reduced tax liability.If your rental qualifies under STR or REPS, then yes—depreciation and losses can offset W-2 income, and you might reduce withholding.Otherwise, you can still update your W-4 to fine-tune your withholdings slightly if you tend to overpay and get large refunds, but be conservative.Run a midyear tax projection with a real estate CPA who understands REPS, STR, and passive loss rules.

Loss of Use / Loss of Rents: Normally, there is a 20% included limit.

i commend them to you to assist you in learning what not to do as you start out.Baltimore - a path to never-ending painSell at a loss or rent at a lossExperience of OOS investing in Cleveland after 1.5 years.Memphis Turnkey Tenant Turnover Costsif you have any more questions, i'd be happy to connect with you. 

If the property is profitable on paper, it can offset the mortgage payment or even contribute positive income.BUT, if the property shows a loss (after depreciation, vacancy, expenses), it could negatively affect your DTI.Some lenders add back depreciation, but still, a paper loss can reduce borrowing power.

Accidents, injuries & general loss happen.

In your friend's situation, the loss would not be the amount he has spent improving the property, but the value of the property as improved by the partial construction. 

If you want to maximize revenue with the co-living strategy, maybe see if there's anything you can improve on your operation to minimize your issues down the road. 

., 100+ hours and more than anyone else), you may qualify for the STR loophole, allowing depreciation and losses to offset W-2 or active income, even without Real Estate Professional status.

I did this with minimal knowledge so there was a large dose of luck and timing, lots of hard work. 

Or do you keep it minimal until the city asks for more detail?