Rental Property Deduction Limit

[Zulu Black]

Hello All,

This year, in July I started to enter the realm of real estate investing by renting out my SFH for $4k/month. I also have a full-time engineering job. I understand an individual may deduct up to $25,000 of real estate loss per year as long as their income <$100,000. However, my combined allowable deductible (property tax,depreciation, mortgage interest) already exceeds that amount.

I read this threshold doesn't apply if you're classified as a "real estate professional". Although my full time job is in engineering, I am in the process of starting an LLC with my partner. We're planning to invest into rental properties and I feel that I've exceeded the 750 hours mark.

I want to ask if there's a way to be able to deduct more that the allowable $25,000.

Thanks. I appreciate all comments. 

[Michael Plaks]

@Zulu Black

I'll word it stronger than @Eamonn McElroy did: it IS impossible when you have a full-time job. The only possibility for you to qualify as a RE Pro is if you're married, and your spouse qualifies - i.e. your spouse does not have a full-time W2 job but works heavily in real estate. 

There is also NO way you exceeded 750 hours that count for the RE pro designation. Reading books and BP forums is highly encouraged, but these hours do not count. Neither does mingling at local REI events.

I'm also wondering why would you need room for more than $25,000 on just one SFH property. You should not have that much loss on one house, even in NY.

As to the $25,000 allowance itself, it is phased out once your income reaches $100k and disappears completely at $150k. As an engineer, you might be there already.