All Forum Posts by: Account Closed

Hey Rohan, 


You generally cannot use K-1 losses from your multifamily syndication to offset your W-2 income unless you meet specific IRS requirements. These K-1 losses are typically considered passive losses, which means they can only be used to offset passive income, not active W-2 income. The main exception is if you qualify as a Real Estate Professional (REP) by spending at least 750 hours per year actively participating in real estate activities and meeting other IRS criteria. Since your W-2 income is above the limit, it's unlikely you qualify for REP status, so the losses would typically be suspended and carried forward to offset future passive income. However, if your spouse qualifies for REP status (for example, if they are a stay-at-home partner), you may be able to apply the losses to offset your combined income.

Hey Eric, 

Your strategy is mostly correct, but there are a few clarifications. For your wife to qualify as a real estate professional (REPS), she must spend more than 750 hours and over half of her working time on real estate activities, not just 150+ hours. REPS and STR are not related tests. The 100/150-hour rules you've seen are likely referring to material participation, which is necessary for short-term rentals (STRs) to be treated as non-passive income. Since you file jointly, if she meets the material participation test, you can offset your W2 income with STR losses. A simple spreadsheet for tracking this can be used, I am happy to share a copy of the one we give our clients. Keep in mind that tracking income, expenses, and hours meticulously is crucial for maximizing your tax benefits.

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 Hey James, 

A withdrawal like that will still have the 10% penalty, but cost seg will help offset your business / 1099 income here as an agent if you qualify as a real estate professional. (REPS)
A real estate professional for tax purposes is someone who materially participates in real estate trades or businesses, spending more than 750 hours a year and over half of their working time on real estate activities. This designation allows them to treat rental real estate losses as non-passive, meaning they can deduct losses against other active income. Qualifying as a real estate professional can offer significant tax benefits by offsetting other taxable income with real estate losses.

 Hey Pamela, 

Right now its a bit tight! I would reach out to folks providing value on the forum quickly and see if they are taking on new clients and that they can fit you in for the 15th deadline. 

 Hey Alex, 
Your idea makes a lot of sense given the fact that you're burnt out on your W-2. You could take this time to take a break and qualify for real estate professional status while your wife continues to make great money.

As far as the estimating paper losses that multifamily would produce if the strategy is worth it from a tax perspective, you would want to use a cost segregation calculator. I have one of these on my website if you need. You can figure out what depreciation would get created based on the particular property you're buying and you can then use that depreciation against your wife active income and make the calculation like that. Please let me know if you have any questions.

Hello Carolyn, 

To qualify for the short-term rental (STR) tax loophole and meet material participation requirements with only two months left in the year, the IRS does allow material participation to be spread over a short time frame, as long as you meet the specific thresholds. The 100 hours rule can be satisfied as long as no one else (including contractors) materially participates more than you. Typical activities that count toward material participation include managing bookings, communicating with guests, handling maintenance, and setting up the property (e.g., furnishing, updating the deck).

As for the rental days, there's no strict minimum for the year, but the STR loophole generally applies when average guest stays are less than 7 days. So, if you secure just 1 or 2 bookings under 7 days, you could potentially meet the criteria, provided you demonstrate material participation and proper active management of the property. Always consult a tax professional to ensure you meet all the IRS guidelines and documentation requirements.

Hey Elliott, 

From a tax perspective, placing a rental property into an LLC generally doesn't offer significant tax advantages, as a single-member LLC is considered a disregarded entity by the IRS, meaning income and expenses are still reported on your personal tax return via Schedule E. However, the main benefit of using an LLC is liability protection, shielding personal assets from lawsuits related to the property. It's important to note that forming an LLC may increase costs due to additional filing requirements and potential state fees.

 Hey Sartaj, 

I highly recommend reaching out to folks providing value in the forums and asking if they are currently taking on clients. As accountants we are not allowed to promote ourselves as it is against the forum rules. Or you can make a post in the classifieds! 

Hello @Huiping S., 

To report losses from Hurricane Helene on tax returns, affected individuals should first confirm if the area is a federally declared disaster zone, as this allows for casualty loss deductions. They should keep detailed records, including photos of damaged property, repair estimates, and receipts for items like cars and appliances. It’s also important to document any insurance reimbursements received, as losses must be reduced by that amount.