Is this doable? I don’t yet have a good accountant to ask.I was told previously that I could not utilize my real estate LLC losses against my technology business consulting gains. My technology consulting business has no losses so I have no write offs. Others tell me they do just that so I am not sure how accurate that is. Any tips on taking advantage of park depreciation and maintenance?
I am not an accountant (but at one time I was pretty well-versed in tax law). I believe (and you’ll have to double-check me!) that the answer depends on whether you are “materially” involved in managing the real estate business. Real estate income (rental income) is generally considered “passive” income and if you have depreciation and expenses that exceed your rental income, you will have “passive losses” which cannot offset your ordinary (active) income.So passive losses cannot offset ordinary income. However, if you spend sufficient time on the real estate business (I believe it has to be 500 hours per year or more than half your working hours) then you are “materially” involved and different rules kick in. But you’ll have to be able to prove that to the IRS – and they will be very curious if you’re shielding your usual job income with real estate losses, because this is a very common tax shelter that they don’t want to let you get away with.I think there are two separate tests, and I can’t remember just now what they are; I think one is whether you are “materially” involved and I think the other is whether you are “actively” involved. But I think at least one of them is that 500-hours per year or more than half your work test.Brandon@Sandell
Very helpful. Thanks Brandon.