@Rud Sev Your Section 1231 losses from the sale of rental properties were likely correctly reported on Form 4797 (Part I) as ordinary losses, allowing them to offset all types of income.

Last year we created a masterclass for helping ordinary people become the Local Developer in their community so that you can be empowered to do your own deals.

If you operate the vacation rental as a short term rental, you will be able to take advantage of taking any losses you have on the property against your ordinary income.

As your Modified Adjusted Gross Income (MAGI) increases, the amount of rental losses you can offset against your ordinary income phases out.

This is most of the depreciation you are taking year one.You can calculate your depreciation recapture by taking the sale price of the asset and subtracting the adjusted cost basis.The adjusted cost basis is what you paid for the asset plus any improvements you made along the way minus the depreciation you took along the way.The profit above this original cost is taxed as a capital gain, but the part linked to depreciation is taxed at a maximum rate of 25% under the unrecaptured gains of section 1250.To recap the tax rates are:- Sec. 1250 real property: 25%- Sec. 1245 property and 15 year 1250 property: Ordinary Tax RatesThere are ways to minimize depreciation recapture especially if you know how to work smart with your CPA.1) Asset Valuation at Time of Sale - Sellers can minimize recapture by reallocating the price of the assets on sale.

@John Davey With an AGI over $150,000, all rental income and losses are bundled together and cannot offset ordinary income due to Passive Activity Loss (PAL) rules.In your example, the combined $3,000 net loss (from rentals 1, 2, and 3) is carried forward since your AGI is above the threshold.

Cost segs unlock these savings, but the losses won't offset your ordinary income from your job unless you are an RE Pro.Here's how to think about RE Pro status to make the best case with your CPA and the IRS:RE Pro Status starts with the IRS definition of a Real Estate Professional (IRS Pub 925).It is not as simple as getting a real estate license or working for a firm that provides real estate services.Ask yourself these questions to see if you qualify:Q1: Are you in the right business?

I do have a zero-leverage option which is taking out retirement funds early and $30k is tolerable for me.I assume you know but you will pay a 10% early withdrawal AND pay ordinary income tax on that 30k.

Thanks a million, KristinSTR is great for using depreciation to offset ordinary income and passive income.

If you’re considering holding multiple properties, managing cash flow within the account to cover these expenses is crucial.If you convert a Traditional IRA to a Roth IRA, be aware of the tax consequences, as the conversion amount is taxed as ordinary income.