Author Topic: Tax question  (Read 195 times)

stephen902

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Tax question
« on: July 01, 2018, 08:43:57 AM »
I am in the 35% tax bracket based on my standard job. If I buy a rental, can I deduct the mortgage interest, property tax, depreciation, and repairs from my normal income? In other words, when crunching the numbers to see if this makes sense, can I take all those costs and just multiple by 0.35 and tax savings? Thanks.

oldmannickels

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Re: Tax question
« Reply #1 on: July 01, 2018, 01:36:24 PM »
probably not. rental income is considered passive. You can read online just search for passive activity loss limitation.

tralfamadorian

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Re: Tax question
« Reply #2 on: July 01, 2018, 02:00:27 PM »
probably not. rental income is considered passive. You can read online just search for passive activity loss limitation.

+1

There are income limits to be able to deduct the passive losses against your other income. I believe the phaseout maxes out ~$150k for MFJ. However, the loss do carry forward indefinitely so you do see cases in which high income people who have been banking losses are able to sell highly appreciated investment properties without a ton of taxes being owed.

Where very high income people work with this, if one spouse's income is very high, is to have the other qualify as a real estate tax professional. No loss limits and no income limits.
Very dorky but useful IRS powerpoint:
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf