Feel like I’m getting taxed incorrectly

[Nick Causa]

Maybe someone could help, or tell me i’m all wrong. I know taxes are your biggest expense and theyve been crushing us. My wife and I own two rental properties. One we house hack and the other we airbnb. We’re W2 employees and our accountant tells us we can’t see any of the deductions on either property because we make more than 150k combined on our W2. Does this make sense? Last year we paid a hefty $9000+ tax bill. The year before it was $6000+. We contribute to a 401k but we cut that contribution down significantly to help us buy an investment property. Any suggestions?

[Ashish Acharya]

@Nick Causa , He is right, If you make more than 150k, you cannot deduct the passive loss.  But, remember, these losses will be carried forward and can be used in the future. 

The other way is to qualify for as RE pro to deduct the expenses, but with both being a W-2 employee and just two properties, with one being AirBNB, it might be impossible to do so. 

You need to talk to your CPA and ask if there is a way to decrease your AGI below 150 k if you are in the borderline. If not, 

1) Invest in other Passive activities to generate passive income

2) If you are involved in other business, using different Depreciation methods, the Section 179 deduction, a Keogh, SEP, or SIMPLE IRA plan contribution, certain accounting method elections, and a health savings account contribution are examples of strategies to consider.

3) Next time you buy a property, rather than contributing a capital, loan to your entity. The self-charged interest ( your interest income from lending to your business) that converts your interest income ( which is normally a portfolio income) to passive income. You can then offset a passive loss. ( I know it is a complicated topic, please talk to qualified professional) 

4) Maybe decrease the depreciation expense of the property using a slower depreciation method to have less loss that cant be used because of your high income.