W-2 and Depreciation

[Arthur D.]

Hi there friends. I've purchased my first property late last year. My only income was months rent Dec. So. My question is. Can I deduct my loses from my W-2. My loses would be rehabbing, utilities , etc. About $15k. I calculate. My tax guy devised me to hold the write offs for next year and that we should start our year from dec since we only had one months rent profit. I thought maybe we can incorporate the loses from my regular income if that would be to my benefit. I read on Bp. That IRS Allows you to deduct the loss from the rental property up $25k if you make less then $100k. I don't think my tax guy is aware of his rule. Please advise. Thanks.

[Dion DePaoli]

The reason you see a licensed tax person is because they are licensed to prepare taxes and have a knowledge of tax law.  You do not have losses in this property.  You are using the wrong word and it is giving you an incorrect idea of tax treatment.  You purchased a property and made improvements.  Improvements are not losses.  

Further, your capacity to claim losses against W-2 income are very limited.  Real estate is considered a passive investment, you will need passive income in order to realize actual losses.  I am guessing you do not have those yet.  

Here is the 2015 IRS Real Property tax guidance  https://www.irs.gov/pub/irs-pdf/p527.pdf

Moral of the story here, your tax guy is guiding you better than this thread so far.  Tax advice can come from anyone, it doesn't mean it properly takes your tax situation into account.  Be careful in those matters.