Rental Property Investor · Reedsburg, WI · Member since 2011 · 1k+ posts · 857 votes
Hello BP Members,
So far I have been doing my Buy-n-Hold investing inside of my SDIRA so have not had to worry about the 'tax efficiency' of things so far.
But, I am planning on buying some properties conventionally in the near future and have been looking at the tax benefits/efficiency of the potential passive losses in regards to my tax situation.
In my 'day job' I am self employed. Having recently done my 21015 taxes in reminded my what a huge bite SSI taxes are since I have to pay around 15% when both halves are figured in. I am at the top end of the 15% federal rates so the SSI was a bigger hit by far than the federal and state put together.
I am wondering if I am figuring things right? Let's assume:
35K Self Employed Income
Negative $5000 Rental Income after Depreciation is figured in
Would this not then lower the amount of income that I would have to figure ALL taxes on, including SSI, Federal, State, etc...?
Part of what got my thinking a a little bit perked up is that figure goes from about 20% up to about 35% when figuring the SSI in there.
Is it also correct to assume that real estate investors that are NOT self employed dont really get any benefit even on the 50% of the SSI they have paid in since it has already been taking out of thier paychecks and there is not (to my limited knowledge) a way to lessen that by having passive losses?
the analysis on this gets pretty complicated, but in most cases passive re losses do not reduce ssi. There are exceptions to this rule (e.g. if you are a real estate professional and can show that you dedicated the majority of your time to actively managing real estate).
In general, I only hold assets which produce ordinary income gains in tax deferred retirement accounts. The advantage of depreciation, other deductions, 1031 exchanges, etc makes it less tax efficient to hold inside a tax deferred retirement account. Notes on the other hand are a great fitime IMO.