What if You Make Too Much Money to Get Real Estate Deductions?

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This past Saturday, my partner and I did a real estate webinar. We couldn’t handle all of the questions in the allotted time. Today we’re looking at two questions that basically say the same thing:

What’s the point of getting real estate deductions if I make too much money?

First, the questions themselves:

All of these great write offs only apply if you qualify as a real estate professional right?

Question: Hi, my wife and I earn more than 250K annually in our day jobs, and I doubt we can qualify for real estate professional status because we cant put in the hours required. Does this mean real estate investing (rental) is out of the question since we cant get ANY tax deductions?

If you make over $150,000 per year and can’t qualify for the real estate professional deduction, then you can’t take advantage of real estate losses against other income.

If you’ve invested for more than just tax benefits, and followed some of the investment fundamentals so you have cash flow, then you can take these real estate deductions against that cash flow.

Try that at your job. Can you make money and never pay tax? You might be able to with real estate.

And what if you have losses in excess of your income? You then have a suspended real estate loss. This loss doesn’t go away. It stays there until you sell the property. It then can offset gain from the property or be used against other income.

In my opinion, good real estate investment still makes sense. It also makes sense to look for and take every legal deduction you can. At worst case, it becomes like a tax savings account, to be used in the future.

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