1099 Main Income - Can I offset it with my rental expenses

[Steven Morris]

Can I deduct my rehab expenses from my 1099 wage earned at work, to offset my high income? I make 93$/hr (193K a year) on my 1099 and my wife makes around 95000 a year salary. I also purchased a rental home and I am going to end up spending 20-25K in rehab costs. Hopefully more this year. Im looking for ways to keep my taxable income low, and my monthly cash flow high by leveraging my real estate business. 

Neither are in an LLC, both are just in my own name. Can I mix and match income and expenses since technically I am working for myself in both situations, half my time at my tech gig and half my time doing real estate investing?

[Natalie Kolodij]

Nope Sure can't. 

Rental income and expenses are recorded on Sch E. 

It's passive income. Passive losses can only offset passive income (Unless your AGI is under 150k, phase out begins at 100k- or unless one of you qualify as a RE Professional- which if you both have full time jobs isn't very likely)

So your potential passive losses from the Rental will carry forward until there is a time with passive income, and then it will reduce that.

Also, much of those renovations to get that rental ready to rent will need to be capitalized. Added to the building value and depreciated over the life of the rental, not expensed all at once. 

I would recommend reaching out to a tax professional to help you maximize tax strategy.