All Forum Posts by: Natalie Kolodij

 They actually wouldn't. 

Passive loss limits start to come into play at AGI > $100k...and after $150k is when your passive losses carry forward. 

If their w2 income is $100k- after their personal deductions and any applicable credits they should be under $100k and be able to write off up to $25k annually generated by their rental. 

Nope- Only one needs to qualified as long as they file together.

If he bought the house in December...the prior owner is who would have paid them. 

You paid a professional to handle your taxes correctly, and ideally strategize your tax situation. 

They're literally doing that. Taxes are complicated- you can't choose to file incorrectly to simplify things. 

They're asking exactly the right questions: If you use a personal asset for business use, to generate income, you need to account for that in all of the correct ways. Including applying depreciation to the business use of an asset. 

Just to elaborate on what other pros noted

You don't technically need either for something to be deductible 

But if Audited- you have to prove: 

- Something what was necessarily business epense

-You paid that  expense 

Of the two I'd almost say Invoice > receipt. 

A receipt shows payment but you can also get that from your bank/credit card statement. 

An invoice shows what you bought - you can't get that anywhere else (depenidng on the company).

Are you going to manage it from out of state? or have it managed?

Are you also going to use it for personal use? 

Either of those can throw a little wrench into things

 On a flip the majority of your expenses should be capitalized, and not written off until the property is sold. 

You can make an election to write off tax/interest but not really much else. ALl of the carrying costs, renovations, ect get added to your basis of the property. 

And when you sell it those expenses all offset the income of the sale (They're a cost of goods sold). 

So depending on what you wrote off...you may need to amend your prior year. 

If you move into the house those expenses before you move in will be capitalized and when you move/sell it will reduce your gain. 

22% is what? 

Your county is arguably one of the most reliable options to the IRS. 

You will take your total basis (purchase price+ closing costs) and divide it the same way. 

If the county is 22% land 88% building...you do your cost basis * 22% to get your land value, and 88% to get your building value. 

If you had a full appraisal done it may also have a land value that can be utilized. 


You don't change your allocations year to year. If your rental was put into service in 2021 and you set up land vs. building then...now you do nothing. That carries forward using those amounts for the life of the rental. 

There is no Tax Savings of holding rentals in S corps and huge tax downfalls. 

You almost never want rentals in S corps. 

Just another REI Tax pro here to mimic that Michael is 100% correct.

STR ALWAYS goes on sch E unless both < 7 AND substantial services.

You can't just put it on a schedule that allows a loss. It stays on schedle E regardless of being passive or non passive.