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Updated over 1 year ago on . Most recent reply
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Looking for advice on a plausible tax saving strategy
Some background that I hope provides cover for naive questions.
My husband has a regular W2 job in the bay area. I used to work as a hospital/pharmacy admin, but took up work at my local elementary school to be close to my kids. Now with them on middle school autopilot, I want to get more involved in finances and figure out how real-estate can help with saving on our California/Federal taxes. So, in other words, am very early in my learning and excuse my naivete.
Regarding our tax strategy, we talked to our regular CPA who advised us to setup a LLC (in cali) in my name, loan money to this LLC and purchase rental property. Since I'd be self-managing the rental property, the downpayment, expenses and depreciation on the property would be tax deductible against our W2 income.
Now, this sounds too simple to me. Also, he couldn't confirm if this required having a Real Estate Professional status (which I've read is very tough and litiguous). Can someone with more experience (tax professional or otherwise) please give their take on this? Sounds simple enough but not sure why everyone doesn't do that.
Thank you
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- Accountant
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Having a property within an LLC does not change the characteristics of the income.
Normally, rental income is considered passive.
You may need to claim real estate professional status to change it from passive to active.
It is concerning that your CPA is offering a strategy but unable to confirm your concern of whether or not you need real estate professional status.
- Basit Siddiqi
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- 917-280-8544
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