EP190: What Is Passive Loss and How Can You Use It on Your Taxes?

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Although the word “loss” has a negative connotation, a passive loss in your real estate business can actually help you save money! On today’s show, Natali and I are talking about passive losses, and how they can benefit you in your real estate business.

We’ll discuss the general rule about passive loss, as well as the two exceptions. We’re sharing how we use passive losses, and how you can apply this topic to your real estate business and tax return! Please join us for episode 190 of Investing in Real Estate!

More About This Show
A loss on your taxes means that your business did not make any money for the IRS to tax in a certain year. Claiming a loss is actually beneficial when tax time comes around, because then you don’t owe money! Many high earning investors like to claim a loss, in order to lower their overall tax burden.

Passive loss, however, only pertains to passive income. Luckily, real estate investing falls under this umbrella. Passive loss is anything in which the investor is not a material participant.

The tax law states that you can claim up to $25,000 as an individual if you have an adjusted gross income of $100,000 or less per year. From my experience speaking with hundreds of investors, the majority do not fall under this category.

But luckily, there are a couple exceptions to that rule, which we will outline on today’s show. Tune in to hear Natali and I share more about passive loss, and what we learned from Garrett Sutton’s book, Loopholes of Real Estate! Don’t miss episode 190!

If you’re ready to begin building a passive income through rental real estate, book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.

On this episode you’ll learn:

  • What are the two exceptions to passive loss?
  • How can passive loss explode your ROI?
  • What is a material participant?
  • How does an investor qualify as a real estate professional?
  • Do you have to be a licensed real estate agent in order to qualify as a professional?
  • And much more! 

Episode Resources
Loopholes of Real Estate by Garrett Sutton
Rental Property Cash Flow Worksheet
Subscribe to Investing in Real Estate on iTunes
Find Your Financial Freedom Number
Subscribe to the Morris Invest YouTube channel

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Although the word “loss” has a negative connotation, a passive loss in your real estate business can actually help you save money!