Tax-advantaged Accounts for Real Estate Professionals

[Jasper Cooper]

Hello,

I work a normal job, and my wife is the real estate professional who helps manage our investment properties.  Due to depreciation, we report negative taxable income from our real estate investments, which helps offset my W2 income.  

We own enough real estate and plan to significantly increase our stock investments in the next few years.  We are looking for advice on tax-advantaged accounts.  

I already max out my retirement contributions for my work retirement plan, and we also max out our Roth IRAs and HSA. Are there other tax-advantaged accounts available to us, particularly for my wife as a real estate professional? Most retirement accounts for entrepreneurs max out at 20-25% of net income (e.g. SEP IRA and SEP 401(k)). However, our real estate business generates negative taxable income, so I would think SEPs won't work for us. Are there any other accounts we can use?

Thank you very much in advance!

(Question should be viewed as theoretical and does not necessarily reflect our true financial situation)

[Steven Hamilton II]

Originally posted by @Jasper Cooper:

Hello,

I work a normal job, and my wife is the real estate professional who helps manage our investment properties.  Due to depreciation, we report negative taxable income from our real estate investments, which helps offset my W2 income.  

We own enough real estate and plan to significantly increase our stock investments in the next few years.  We are looking for advice on tax-advantaged accounts.  

I already max out my retirement contributions for my work retirement plan, and we also max out our Roth IRAs and HSA. Are there other tax-advantaged accounts available to us, particularly for my wife as a real estate professional? Most retirement accounts for entrepreneurs max out at 20-25% of net income (e.g. SEP IRA and SEP 401(k)). However, our real estate business generates negative taxable income, so I would think SEPs won't work for us. Are there any other accounts we can use?

Thank you very much in advance!

(Question should be viewed as theoretical and does not necessarily reflect our true financial situation)

 I would pay close attention to make sure it is ONLY due to depreciation. Your losses should not be too significant unless you are accelerating depreciable assets. A typically rental may show a small loss (depends upon scale).

Look at using an IRA for her as well based upon your earnings; however, there are not too many options if she does not have any active earned income.