Less taxes on rental income

[Ali Alain]

Hi there, 

I have a question regarding taxes on rental income. I live in Colorado and I've put my property on Airbnb which generate $500-700 as cashflow per month. My question is: If I decide to put those gains back into my mortgage, will I still have to pay income tax on those gains that I don't have anymore ?

[Dan H.]

Quote from @Ali Alain:

Is it common practice among professionals to deduct full rental income through what I mentioned above or even have negative income ? Also are repairs that improve the house also deductible ? 

Thanks guys for your answers it's very helpful.

 If your rental deductions exceed your rental income (hopefully not a regular occurrence), there is an income limitation on being able to take the full deduction in the year incurred.  If you are an RE professional, the income limitation does not apply.  If you cannot take the full deduction due to income constraint (and not being an RE professional), you can "bank" the deduction to be used in the future. 

The IRS defines the qualification to be a RE professional.  It sets a minimum hour threshold, but also requires the RE hours to exceed all other employment hours, which I think is BS.  They tax side hustles as though you were professional but do not allow the advantage of being classified a professional when it should be able to be to your advantage (note I am not against setting qualification to be a RE professional; I am against one of those rules stipulating that it has to be your work hours greater than other jobs).  I do not make the rules, I must play within the rules.  My wife qualifies as a RE professional under IRS rules (and this year I also would qualify).  

I am not an accountant or tax professional.  Verify everything I indicated with your trusted tax expert.  

Good luck