Applying Tax loss to W2 income

[Mike Masland]

Hello,

Noob question on the potential tax benefits of real estate investing.

My wife and I have W2 annual income (dual income family working for large corporations) that puts us in the ~30% marginal tax rate bracket. We would like to start investing in rental properties.

Let’s assume we buy a property that generates around $5k in annual cash flow, but has a depreciation expense of $15k. That means we have a $10k loss on paper that could be used against our marginal tax rate and save us another $3,200/year. Is that right?

Can you really take losses on real estate investments against your W2 income from the corporate world? Could we do this over and over to reduce tax bill further?

Thanks

Mike

[Ashish Acharya]

Originally posted by @Mike Masland:

Hello,

Noob question on the potential tax benefits of real estate investing.

My wife and I have W2 annual income (dual income family working for large corporations) that puts us in the ~30% marginal tax rate bracket. We would like to start investing in rental properties.

Let’s assume we buy a property that generates around $5k in annual cash flow, but has a depreciation expense of $15k. That means we have a $10k loss on paper that could be used against our marginal tax rate and save us another $3,200/year. Is that right?

Can you really take losses on real estate investments against your W2 income from the corporate world? Could we do this over and over to reduce tax bill further?

Thanks

Mike

 You normally cannot. There are two exceptions: 1) active rental with less than 150k AGI 2) real estate professionals

I have a feeling you don’t meet both. google both. 

You will need passive income to benefit from passive losses.