Posted by Dave Murray, Ohio CPA on August 27, 2003 at 07:12:33:
Huh? You are answering your own question! If you make over $100,000 and have rental losses, you cannot fully deduct them unless you are a real estate professional…
tax question (dianne kennedy’s article) - Posted by Susan
Posted by Susan on August 24, 2003 at 16:44:00:
In reading Diane Kennedy’s article about a real estate professional she says there are unlimited deductions for RE professionals. If one was full time and met that criteria, what deductions could you get (if any) from selling all your properties on contract for deed?
Could i have one company that just rents property (single LLC) and get deductions there, while doing my favorite of selling on contract in another company, having the rental company offset the other? I am thinking of going full time with RE being my only income.
Susan
Re: tax question (dianne kennedy’s article) - Posted by Dave Murray, Ohio CPA
Posted by Dave Murray, Ohio CPA on August 26, 2003 at 11:27:07:
You need to tread carefully here. Real Estate Professional status is desirable for those who make more than $100,000 per year and can’t take their rental losses. CFD has nothing to do with deductions. CFD is an installment sale and is a way to lengthen the time over which you recognize, and pay tax on the gain. If you are considered a “dealer” then you need to recognize the gain and pay the tax at the front end (even though you won’t have all the cash for several years). Diane Kennedy always has good advice but there is a specific context within which it applies.
Re: tax question (dianne kennedy’s article) - Posted by Susan
Posted by Susan on August 26, 2003 at 22:29:46:
Could you give an example of why it is desirable to be declared “professional” when making over 100k, and not being able to deduct rental losses?
Rental losses - Posted by randyOH
Posted by randyOH on August 27, 2003 at 18:26:50:
Susan,
Rental losses (expenses exceed income) are generally not deductible if your adjusted gross income exceeds $150,000. If AGI is $100,000 or less, you can deduct up to $25,000 of your rental losses. If AGI is between $100,000 and $150,000, the $25,000 limit is a reduced amount.
These rules do not apply for a given year if you satisfy the following two requirements:
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More than 1/2 of your work or business activities is in the real estate business.
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You work more than 750 hours in the real estate business.
Using the term “RE professional” is just a short-hand way of saying you have satisfied these requirements. Actually, the tax law does not use this term.
So the advantage of being a “RE professional” (if your AGI exceeds 100k) is that you can deduct your rental losses currently rather than waiting until you sell the property.
HTH,
Randy