Tax benefits from RE investing in high income earners.

[Jose Contreras]

Hello everyone,

We recently started investing in real estate in 2020. We are buy and hold investors and currently have 2 doubles in the cleveland area. We got into investing for it's wealth building annd tax benefits. We also really enjoy it. We hold our properties in an LLC.

Anyhow we are considered by many high income earners, over $400k combined on W2s. Our CPA just completed our taxes for 2020 and our tax bill is quite sizeable and we are not seeing any benefit whatsoever from our real estate activity. He tells us that since we are high income earners, >150k per year, our real estate activity is considered passive and we cannot take any of those benefits .

"LLC is there just to title those properties and to provide you with liability protection. This activity is treated as passive, and you can deduct losses just if your income is under $150k... To get those losses deducted in the current year when income is above $150K, you need to qualify as Real Estate Professional. Based on what you are doing professionally and what you are doing for those properties you can not pass that test. Having or not having LLC has nothing to do with this because the rental activity is by default passive activity."

While I understand that having an LLC makes no difference for tax purposes. We do manage our own properties including driving to and from the properties for showings and have spent a good amount of capital on repairs and maintenance.

Has anyone on the forum had any experience with this? I would love to hear what everyone thinks about this.

Thanks!