It may be beneficial to have a conversation with his accountant or your accountant as they will have all the details.If your partner is a real estate professional, that turns rental losses from passive to active.Therefore, if he has rental losses, they will offset your W-2 income along with income from his S-Corp(K-1 + Wages).Best of luck!

This is going to effects the middle more than the lower end of earners.  

I am a W2 earner and my partner is a REP (broker and investor).

If you do the rental you lose the $500,000 avoidance at the end of 5 years unless you’re military.I believe it’s worth it for a few reasons.A) High W2 income earner with no flexibility for tax deferralsB) Have a long term goal to own a few income producing properties in the Chad Carson small but mighty mindsetC) Plan to hold property for long term.

The STRLH is optimized for high wage earners, earning enough that they can usually qualify and afford to purchase the property regardless of the tax benefits or proposed income.

It can also provide significant benefits for short-term rental owners who materially participate in their rental activity, as these taxpayers may be able to offset ordinary income with accelerated depreciation deductions.However, high-income earners who do not meet the active participation or real estate professional requirements are generally unable to fully benefit from cost segregation due to the passive activity loss limitations under Internal Revenue Code 469.It is important to note that cost segregation is not “free money.”

If you and the other members are active in the business, the IRS expects you to take reasonable salaries as W-2 wages.

I’m a full-time W2 earner.

It can be a powerful way to offset W-2 income—especially for high earners and the self-employed.

When they’re old enough, pay them W-2 wages from a sole proprietorship or family partnership for FICA-free income.