mitigating w2 earnings

[Edwin Rodriguez]

I am about to rent out my first property. will all the expenses incurred lower my taxes from my salary income. i am worried that I only have 2 month in rental income to show on my return. also should I wait to put in a new central air unit until the new year or put it in before the new year. closed on the house in September. thank you

[Ashish Acharya]

@Edwin Rodriguez , You can mitigate your W-2 income via losses from a passive activity, rental loss. The general is a rule allowing up to $25,000 of active participation(see below) rental real estate losses as a deduction against nonpassive income.

You will be deemed to be actively participating if you make management decisions in a significant and bona fide sense. Management decisions that are relevant in determining whether you actively participate include approving new tenants, deciding on rental terms, approving capital or repair expenditures, and other similar decisions.

There is a phase out if your MAGI is above $100,000. 

So, if you increase your expenses via repairs to the rental property, you might be able to use that passive loss to offset your W-2 salary this year and also going forward.