Alot on information on offsetting W-2 income but not much on 1099-R income...

[Michell Chase]

I am currently drinking from a fire house on everything investment real estate.  Closing on my first investment duplex this week and looking for my 2nd.   I hear a lot about ways to 'off set' your W-2 income etc..   I am retired and collecting a pension and access to 401k funds (1099-R income)...so I am wondering how all of the information I am hearing about tax benefits as it pertains to W2 incoming applies to my 1099-R income.  I don't necessarily have specific questions because I am just learning everything.  My investment property is in upstate NY and I live out of state and am managing myself (via my brother that lives in town), not a house hack, long term rental on both sides.

[Joshua Thompson]

Hi Michell!  

Without knowing the specifics of your situation, typically real estate can offset 1099R income but I wouldn't use this as a blanket statement. I'm not sure if you're working with a financial advisor but if you're retired, receiving 1099R income, maybe social security, plus income from other sources you definitely want to speak with an advisor. Depending on your investment strategy, goals, current life situation etc., your entire financial and tax situation could change and possibly not for the better. 

I highly recommend speaking with a financial advisor or your current advisors then bring a tax professional into the conversation. Someone recently made a wonderful post about Medicare Premiums and how they can change if you invest in real estate at an older age.

[Alex Olson]

@Michell Chase Congrats on getting your first duplex going. Huge step! Speak to an actual advisor that knows active real estate investing. Hope that helps. 

[Michell Chase]

Ok.  Thank You.  I am currently trying to identify Real Estate savvy CPA's in the location where the rentals will be as I am a resident of Texas and not NY and I am new to real estate investing.  I am a retired federal employee, I receive a pension annuity and a specialty social security annuity, due to my profession, as I am not old enough to collect social security yet.  That is my only income and currently less than $100k per year for those payments.  I did withdraw from my 401k for this first property downpayment as I do not pay penalties on withdrawals and will definitely kick me into the next tax bracket for this year for overall income.  I have federal health coverage so I will not be a part of the medicare program.

[Joshua Thompson]

Quote from @Michell Chase:

Ok.  Thank You.  I am currently trying to identify Real Estate savvy CPA's in the location where the rentals will be as I am a resident of Texas and not NY and I am new to real estate investing.  I am a retired federal employee, I receive a pension annuity and a specialty social security annuity, due to my profession, as I am not old enough to collect social security yet.  That is my only income and currently less than $100k per year for those payments.  I did withdraw from my 401k for this first property downpayment as I do not pay penalties on withdrawals and will definitely kick me into the next tax bracket for this year for overall income.  I have federal health coverage so I will not be a part of the medicare program.

 I'm happy to jump on a call and point you in the right direction. I'm in Texas as well (Dallas area) but we don't work with clients that have rentals in NY so we wouldn't be the best fit to work together but more than happy to chat for a few minutes. You can also use the "Build Your Team" function above biggerpockets has to find a tax professional and financial advisors that specialize in working with real estate investors.

[Michael Plaks]

@Michell Chase

The main difference between W2 and 1099-R income is that you have a much easier path to qualifying as a Real Estate Professional without a W2 job.

Whether or not qualifying as REP will be helpful to you is case by case. 

[Bill Hampton]

@Michell Chase

I recommend finding an accountant who specializes in real estate taxation, tax planning and federal employee retirement planning. Yes, we exist.

You may want to consider working with your accountant remotely to expand your options.

I would also recommend looking for a accountant willing to work with you throughout the year. You want an accountant who can help you strategize and who is responsive when you want to know the consequences of the financial decisions you are making throughout the year.

Good luck.

[Basit Siddiqi]

W-2 income is similar to Retirement income in that rental losses can offset it if the rental activity is considered active.

[Kory Reynolds]

@Michael Plaks is spot on - character wise, 1099-R income falls in the same "bucket" as a W-2 wage would be, thus to offset this income with real estate losses, it follows the exact same pathway (ST rental with material participation or REP status with traditional rentals), but since you don't have all your time sucked up with a W-2 job, you have much greater flexibility to hit those related hours thresholds under those paths as well.

No idea if he's taking clients - but if you are looking for local(ish) and qualified in TX, Michael is also likely a great one to reach out to.