All Forum Posts by: Kyle R.

@Jon Crosby and @Andrew Wong Thanks for answering.

From what I have read you can deduct net losses up to 25k if you are part of actively managing your property.

https://www.biggerpockets.com/forums/51/topics/347...

https://ttlc.intuit.com/questions/3059105-does-rental-deduction-deducted-from-only-rental-income-or-the-entier-income-including-w2-income-for-example

If this is true, and say Rent minus all cash expenses leaves you income of $2500 a year from this property, but then you can write off depreciation and other non cash expenses leaving your taxable income at a net loss of -$4000. 

If you can deduct that net loss from your personal income of say 75k, your new personal income (salary job + property) = 71k so your are saving 4k in taxable income. At a 25% tax rate you are saving 1k in taxes due to having this property.

Am I misunderstanding this  deduction?

Thanks in advance.

Hi BP I am running through some scenarios for a first rental property which will be out of state using a PM. The scenarios range from a couple hundred cash flow positive per month to a break even per month. I have read a lot about the deprecation factor along with the other write offs and expenses (mortgage interest, PM expense) Cash wise we can make a profit per year whether large or small, but by being allowed to depreciate the prop over 27.5 years and deducting the other expenses we show a paper net loss for tax purposes. Say net loses for the year equal 10k, as a single member pass through LLC, I understand that 10k can be deducted from personal W2 salary under 100k. At a 25% tax rate that 10k of lowered taxable income will save personal taxes $2500. Even though the $2500 aren’t considered business income would I‎t be reasonable to count that onto income earned per year from the property for cash on cash return purposes? Say initial investment was 30k, can you add the hidden 2500$ saved in taxes to whatever the income earned on the property was to find the ROI for analytical purposes?

Hi BP I am running through some scenarios for a first rental property which will be out of state using a PM. The scenarios range from a couple hundred cash flow positive per month to a break even per month. I have read a lot about the deprecation factor along with the other write offs and expenses (mortgage interest, PM expense). Cash wise we can make a profit per year whether large or small, but by being allowed to depreciate the prop over 27.5 years and deducting the other expenses we show a paper net loss for tax purposes. Say net loses for the year equal 10k, as a single member pass through LLC, I understand that 10k can be deducted from personal W2 salary under 100k. At a 25% tax rate that 10k of lowered taxable income will save personal taxes $2500. Even though the $2500 aren’t considered business income would I‎t be reasonable to count that onto income earned per year from the property for cash on cash return purposes? Say initial investment was 30k, can you add the hidden 2500$ saved in taxes to whatever the income earned on the property was to find the ROI for analytical purposes?