Deductions for a newbie

[Jim M.]

So I am a brand-newbie at this, have not done a deal yet.  I realize that the very first thing I need to do is educate myself, which will probably take several months (which will put us into the next tax year) before I am ready to pull the trigger and make that first deal.  My question is, if I spend money now on educating myself (e.g., books, courses, biggerpockets pro membership, etc.) but don't actually begin investing in real estate until next year, will I still be able to deduct those expenses for this tax year?  Or do I need to have a real estate "business" set up first?

FWIW, I am a W-2 employee and also earned a small amount of 1099 income this year, by moonlighting at the same occupation as my full-time job.  My current occupation has nothing to do with real estate.

Thanks so much.  Looking forward to getting to know many of you here on biggerpockets as I begin my journey. :)

[Natalie Kolodij]

Brandon is correct- If you're just doing research/educating yourself you're not a business yet. 

If that were the case people could spend $100k on guru courses each year and literally never do a deal and report losses as  a "business". 

There has to be a defining point where you're a business- and it typically comes down to when you have everything needed to operate. If you don't have properties to sell, rentals to rent, ect....what are you offering customers?

Investing is a little tricky in terms of how tax law can be interpreted because you're not just renting a store, stocking shelves, opening a door. 

You're putting in a lot of work on the front end to get inventory (ie: a house to flip, wholesale, a rental ect) to then sell to customers. But you're still not really in business until that happens. 

Especially on these topics I would find a real estate specialized CPA/EA (Brandon Hall is an excellent one) and listen to them rather than trying to teach yourself something they've spend years becoming an expert in. 

https://www.irs.gov/publications/p970/ch12.html