Valley Lee, MD · Member since 2016 · 10 posts · 2 votes
I am looking for guidance - My husband and I own 3 properties we rent out (all have a morgage) We thought this would be a good investment, but we found out that we make to much money to write any losses off the properties. (until we sell)
I assume starting a buisness and putting the 3 homes under the buisness would be the best thing to do.
We are really interested in someone who has done this or knows the laws.
Realtor · Glastonbury, CT · Member since 2017 · 62 posts · 44 votes
8y
@Joy Buell By making too much money you mean your adjusted gross income, which makes you ineligible to take losses from the rental properties?
If that is the case, creating a company to have the rental properties under the company will have the same effect - your loss from the rental properties will be reported on K-1 (instead of Schedule E), which will be subject to same limitations.
I am looking for guidance - My husband and I own 3 properties we rent out (all have a morgage) We thought this would be a good investment, but we found out that we make to much money to write any losses off the properties. (until we sell)
I assume starting a buisness and putting the 3 homes under the buisness would be the best thing to do.
We are really interested in someone who has done this or knows the laws.
Thank you
Joy
Sounds like you might have a need for a CPA? @Vlad K. what are your thoughts ?
Realtor · Glastonbury, CT · Member since 2017 · 62 posts · 44 votes
8y
@Joy Buell By making too much money you mean your adjusted gross income, which makes you ineligible to take losses from the rental properties?
If that is the case, creating a company to have the rental properties under the company will have the same effect - your loss from the rental properties will be reported on K-1 (instead of Schedule E), which will be subject to same limitations.
Valley Lee, MD · Member since 2016 · 10 posts · 2 votes
8y
Vlad K.
Thank you for replying, so if we are in the same position just reporting on a K-1, how do we seperate our income from the rental property. Another words how do we make any money at having rental property. I am really confused now.
I am looking for guidance - My husband and I own 3 properties we rent out (all have a morgage) We thought this would be a good investment, but we found out that we make to much money to write any losses off the properties. (until we sell)
I assume starting a buisness and putting the 3 homes under the buisness would be the best thing to do.
We are really interested in someone who has done this or knows the laws.
Thank you
Joy
My question is: what "losses"? When you wrote that you "make too much money", are you talking about your other income? Are you deliberately buying negatively cash flowing property in in order to try and lower your taxable income?
[I might be way off base. Just trying to understand].
You do already have a CPA, right? If they can't steer you right - change your CPA! Cheers...
Realtor · Glastonbury, CT · Member since 2017 · 62 posts · 44 votes
8y
@Joy Buell Having a "loss" from your rental property doesn't necessarily mean you're losing money (although sometimes that is the case). Keep in mind that BIG component is your depreciation - which could easily be the biggest "expense" for your rental. Try to add back the depreciation for each of your properties to see where you're at.
Also, keep in mind, that your rental income and expenses do not include principal paid on mortgages.
I think that for you more meaningful result would be: net rental loss + depreciation taken for the year - principal payments on the mortgage (interest portion should've already been included in net loss). That would be your total cash income / loss from the rental property.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
Let me start by saying I’m not a cpa so this isn’t tax advice, go consult a cpa.
From my understanding if your AGI is above 100k they start phasing out how many losses you can take (capped at 25k if you make under 100k), once you hit 150k then you can’t take any losses.
The only way (I’ve seen) around this (assuming you’re married and you file jointly) is to have one of you be a “real estate professional” which means you spend 750 hours a year working actively on real estate and that you don’t spend more time than that on any other job.
If you meet that criteria you can take unlimited losses and use that to offset other income, so in theory you could make say 300k and show losses of 350k and pay zero income tax.
Hope this helps.
You are making money, Your accountant can show you the numbers.
If you make a dollar from rental income it is unlikely you are paying 100% tax on that dollar. On the other hand if you purchased wrong your debt repayment and expenses could show no profit.