There are good reasons not to dissuade people with no experience from participating in any conversation they want to. Here’s a couple:
Process inbreeding; many excellent ideas that lead to significant improvements come from outside an area of expertise or discipline. It’s against the interests of everyone involved to discourage any input.
By discouraging participation you reduce the overall quality and in the end, the accuracy of the sum of the total takeaway of the conversation. That is true because the more ideas in the mix, the more accurate the final result, that’s a mathematical certainty.
I’m not trying to be mean, but the OP may be counting on people to provide correct information here (but let’s all hope he confirms it elsewhere). I ignored her first post with clearly wrong information.
You can’t improve the tax laws or the accuracy of the information here by misstating the law.
You can use business losses to offset ordinary income up to $3,000/yr. Property tax, mortgage interest, and HOA fees (as well as the big one–depreciation) go into that calculation for a rental property.
Also, the implication of the post is that you can do that with a property that is your primary residence, which is even more wrong.
John Adams “ATL Radio RE Guru” said that 1% was Primo Rent.
On Entry Level Homes, I was getting .75%
He considered the Entry Level 3/2 was the bread and butter.
I do not know much about renting the high end… but I suspect these would take longer to rent and the folks would be far more picky and stay a shorter time… folks on the Executive tract here for a year or two… Just my opinion.
Here is a sample of John Adams… no one saw this year the way it has…
Unless you jump through some pretty high hoops, rental income is passive income. Passive income losses cannot be used to offset earned income. A salary is earned income.
SS’s statement regarding private home property taxes was correct, so you’re half right…
I’m no tax expert but…I think you are confusing “passive income” with “capital income.” they are not the same.
The $3,000 limit toward earned income applies to “capital income” losses. Capital income is income generated with capital, not RE rentals.
The limit on “passive income” losses is generally limited to passive income sources or… you might be able offset your personal earned income… IF, you can manage to jump through a myriad series of hoops (like a ridiculously low MAGI.)
For anyone with a regular earned income, it’s just about impossible, and in the case of the OP it would be a non-starter. See link below:
Real estate professional status is indeed a high hurdle. But OP can likely still deduct some losses. Here’s an excerpt from IRS Publication 527:
Don’t complete Form 8582 if you meet all of the following conditions.
Your only passive activities were rental real estate activities in which you actively participated.
Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately and you lived apart from your spouse all year).
If married filing separately, you lived apart from your spouse all year.
You have no prior year unallowed losses from these (or any other passive) activities.
You have no current or prior year unallowed credits from passive activities.
Your MAGI is $100,000 or less ($50,000 or less if married filing separately and you lived apart from your spouse all year).
You don’t hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust.
If you meet all of the conditions listed above, your rental real estate activities aren’t limited by the passive activity rules and you don’t have to complete Form 8582."
Perhaps you’re considering $100,000 a ridiculously low MAGI?
In this case Yes, $100k is a ridiculously low MAGI, here’s why:
The average median Johns Creek household income (ages 25-64) is $135,489.
To qualify for the original 2012 purchase price the OP would have to have an income around $140K-$160K. That income would be higher than that today, probably $160K-$200K.
Context matters… your experiences may differ from the the OP’s.
MAGI is less than household income, so I wouldn’t think it would necessarily be a stretch. Certainly not enough of a stretch to write it off completely.
Again, context matters. At $160K annual household income the OP is in the top twenty percentile of US taxpayers. About 87% of US taxpayers use the standard deduction. It’s highly unlikely that the OP had a MAGI as low as $100K for a joint filing, much less $50K for a married filing single return.
To qualify for the under $100K MAGI, the OP would have to have over $60K in legitimate deductions and couldn’t deduct foreign taxes and other deductions allowable under AGI rules. MAGI income is never less than AGI.
IMHO it ain’t gonna happen. But, maybe the OP is tuned in and he could answer the question for us.
