All Forum Posts by: Alfredo Cardenas

That's right. My wife alone meets the 750 hour of Reps and we combined meet the Material participation. I totally understand those rules.

My issue or complication is not that part.  

The issue is that I have several moving parts in 2024 happening and I am not sure which way to go. Kory is saying that, if i choose the REPS route this year, I cannot use my 200K passing loses in 2024 to offset the capital gain of the 3 homes i sold this year. Additionally, I know that I can't use those 200K  prior losses to offset W-2 via REPS. If I dont claim REPS this year, then I will be able to use the 200K prior losses to offset capital gains o the sale of the 3 homes.

I guess I save more money by not claiming REPS this year which is a shame since my W-2 next year will be less than 100K. I thought that I could do both of the following when using REPS: 

1- Use my 200K prior losses to offset the capital gain of the sale of the 3 homes

2- Use Reps this year and cost seg my remaining 3 homes to offset W-2 via REPS.

But, according to what Kory said, I cant do both at the same time.  

Hey Kory,

Thank you for the explanation. I am in a odd spot and need to decide what to do but it is complicated. Here is exactly where i am at:

1- I had 6 rental homes as of 2023 with a overall passive loss of $200K from those 6 rentals carrying over to 2024. My W-2 for 2024 is over $250K which is the reason why i want to use REPS and MAterial Participation in 2024 by doing a cost seg  to offset W-2. 

2- In 2024, two things happened: I married my wife who is a realtor and I also sold 3 of the rental properties which created a capital gain of $220K (one rental was a loss). 

Are you saying that if I go the REPS route and combine all rental activity, I wont be able to use the $200K loss carrying over from prior years to offset the capital gain of $220K (sell of the 3 homes in 2024)? and that I can only offset my W-2 by the loss created in 2024 by doing a cost seg on 3 homes left? so, one or the other but not both? 

What I read and understood from another source is that my wife has the 750 hours needed to qualify for Reps by herself (since she is in the real state business as a realtor selling and buying homes for her clients). Then, material participation (500 hours) is only related to the activities or time spent managing my rentals which we can combined (combined our hours spent in the rental activities of my rental properties). Reps and Material participation are two different activities. She qualifies for Reps (750 hours) on her own and the 2 of us combined get to over 500 hours of material participation. 
I think that's how it works. Can anyone confirm this?

Yes. Thats what I learned but please ask the experts

Hello, yes, there are all long term rentals. I keep reading and I learned that prior year passive losses "can not" be unlocked to offset current year W-2 income via REPS if me or my wife became REPS in 2024. I can use past losses to offset current year capital gains but I can not use them to offset income in 2024. I can only offset w-2 income with losses of the current year in which my wife became Real state.  

Thank you

Hello, Anyone has experience using REPS status via their wife or husband to offset W-2?  

MY 2024 W-2 will be more than $300K and this year (2024) I married a real state agent. I have been reading a lot and educating myself on the REPS scenario for me to use the real state losses in 2024 to offset my 2024 W-2 income. I believe my wife and I pass all the tests under REPS and material participation (adding our time spend of our rental together). I understand that I can not use any prior rental looses losses to offset W-2 in 2024 ( i am using those prior year losses to offset capital gains of 3 homes i sold in this year/2024). BUT, I believe I can do a cost seg and bonus depreciation on the 3 remaining (the ones that I did not sell this year) rentals in 2024 to use those losses to offset my 2024 W-2 via REPS. Is this correct?

Questions:

1- Does the above strategy sound correct or am i am missing something? If this is right, I can save a very significant amount on taxes. 

2- what is the  estimate percentage of people with high W-2s that get audited my claiming REPS via their wife REPS status to offset W-2? Is it almost everyone? 

3- Does anyone have an example of a time log for the material participation test? 

Thank you. Here is another question for the group. I had 6 properties. This year, I sold 3 of my rental properties (one has a large capital, one at a loss (because I bought it at the top of the market), and the other one breaks even). I plan to use my $200K losses carrying as a group from prior years to offset the any gains from the sale of these 3 properties. That leaves me 3 properties in 2024. 

Here is where it gets interesting. MY 2024 W-2 will be more than $300K and this year I married a real state agent. I have been reading a lot and educating myself on the REPS scenario for me to use the real state losses in 2024 to offset my 2024 W-2. I believe my wife and I pass all the test under REPS and material participation. I understand that I can not use any prior losses (whatever remains after the offset of the capital gain of selling 3 homes) to offset W-2 this year. BUT, I can do a cost seg and bonus depreciation on the 3 remaining rental in 2024 to use those losses to offset my W-2 via REPS. 

Questions: 

1- Does the above strategy sound correct or am i am missing something? 

2- what is the percentage of people that get audited my claiming REPS status to offset W-2? Is it almost everyone?

3- If Audited, they will ask me for a time log of all rental activities to see if we meet the hours required and one or a a couple. I dont have one so I will need to create one from scratch for 2024. Where can I find an example of a material participation log? 

4- The more I learn about REPS and its complexities (mostly in the material participation part and the time log part), the more I get discourage to use the above strategy to offset my W-2. BUT, we are talking about a huge offset of my W-2 so this is why I posted this to see what everyone experience is regarding using REPS to offset W-2. 

Thank you

Now that understand that part, now I need to figure out 1250 recapture rules, for an add back of previously deducted depreciation.

I cant figure out how to find, on my tax returns, the total depreciation over the years up to 2023 on each property. I need to deduct the total depreciation from my Cost basis for the property being sold to figure out how much is subject to capital gains and how much is subject to 25% depreciation recapture. I also cant find total basis on 2023 for that property