How will building RV/Boat storage impact my W2 taxes

[Matthew Crane]

I'll make it quick. My W2 income is >$550k/year, if I build an RV/Boat storage facility, will my storage business expenses/losses be able to reduce my W2 taxable income? Or do I have to have REPs status for this side business to affect my W2 income in any way? Also, with a new build (assuming REPs), would I be able to do a cost segregation and use advanced depreciation? Thank you all

[Kory Reynolds]

Quote from @Matthew Crane:

I'll make it quick. My W2 income is >$550k/year, if I build an RV/Boat storage facility, will my storage business expenses/losses be able to reduce my W2 taxable income? Or do I have to have REPs status for this side business to affect my W2 income in any way? Also, with a new build (assuming REPs), would I be able to do a cost segregation and use advanced depreciation? Thank you all

 Generally self storage is considered "Rental Income" unless there is some substantial services involved.  What is the level of involvement you will have? What is the level of services that will be provided?  IE is it just effectively a secured parking lot that renters can come and go as they please with minimal oversight?  Or are you offering cleaning & maintenance services?  

Assuming this is a passive business - meaning you are not materially participating - any cost segregation fueled losses would have no impact on your W-2 income.  The losses could be used against other sources of passive income and that is it.

If it is a standard self storage model, and thus treated as rental income, then in order to get anything other than passive treatment you would needs REPS status.  Assuming your $550k W-2 job is full time, that means you need to work 2081 hours (at least 50% of your time) in your rental business.  Something tells me you won't be working 4,060 hours to do so - 80 hours a week year round.

If it is a more active rental model that it is not considered "rental" income, then you would need to put in at least 100 hours with that being more than anyone else (employees, contractors, management company, etc), or you would need to put in at least 500 hours.

So your "quick" question is actually fairly complicated.  You should consult a tax professional to help get it sorted and set up a strategy.