Offsetting W2 and capital gains by investing into real estate

[Alton Johnson]

I've been lurking around for quite some time and finally at a point to where I can make some major moves in real estate. Aside from capital gains that I have to offset this year, I am also now an W2 employee and fall into the 37% tax bracket.

From my conversations with my CPA and much research online, I have learned that I cannot offset my W2 income taxes with real estate unless it's short-term rentals, since I can't qualify as a real estate professional. However, on the flip side, I'm also noticing and reading that I'm able to offset my w2 income taxes from losses suffered by an LLC. I'm a little confused by this because it seems that I can offset w2 income with LLC losses, but not if it's through real estate investments other than STRs?

Anyone able to chime in on here? I've talked with my CPA and also just waiting on a response, but couldn't help myself but to post here and get some feedback as my head is spinning.

I'm essentially looking to make a big investment into qualified opportunity zones or STRs, depending on what helps offset my capital gains + w2 income.

[Joseph Palmiero]

Quote from @Alton Johnson:

Quote from @Joseph Palmiero:

If you are flipping houses, the IRS considers that you are in the business of buying and selling real estate.  In this case you can deduct a loss generated from a flip.  

The IRS treats real estate rental activities as passive with the exceptions that you talked about.  You are generally not allowed to offset passive losses with your other income such as w-2 and business earnings.

Flipping houses is not considered rental real estate.

LLCs do not change the tax outcome of your business and investment activities.

 Thanks so much for this information. What about investing in opportunity zones? I assume I can't offset W2 with those investments either, is that right?

You are correct.