If you don’t qualify as a Real Estate Professional (which isn’t easy to do), you can only claim up to a $25K loss in real estate on your personal income tax. Any additional losses can be rolled over to future years, and can be used to offset future gains, or can be used if you ever do qualify as a Professional.
Btw, to qualify as a Real Estate Professional, you need at least 750 hours a year doing “active” RE tasks related to specific property, and the time you spend must be at least 50% of your working time in that year. It’s not an easy thing to achieve for a part-time investor.
Currently I’m not qualified with real estate professional to offset my income tax using negative cash flow from my rental properties. If my rental property is titled in LLC, can I offset my income tax using negative cash flow from my LLC?
Thanks much in advance for your great help!
The short answer is NO. As a general rule, an LLC is tax neutral. If you are considering a single member LLC, then the income or loss from your rental activity flows through to Schedule E on your personal tax return just as it would if the LLC did not exist. You don’t qualify for real estate professional status, so you are only left with suspended losses which you carry forward to the next year.
An LLC is just a pass through entity as far as the IRS is concerned so it won’t make a difference. What do you mean you don’t qualify at the present time as a re professional. The standards aren’t that much to where you wouldn’t qualify.
Really appreciate your response!
I’m full-time w-2 employee and above the high-income limit for taking the loss. Even though I have spent enough spare time for my rental business. But my accountant doesn’t recommend to claim to be real estate professional. So I want to check if the property is in LLC, can I take the rental LLC business loss for the current year?