EP323: Understanding Passive Loss – Interview with Tom Wheelwright
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When it comes to business, you might think that loss is something you want to steer clear of. However, creating a passive loss in your real estate business can actually help you save money! This topic can be quite confusing, so on today’s show we’re calling on an expert!
On this episode of Investing in Real Estate, we’re bringing back tax genius Tom Wheelwright to discuss the ins and outs of passive loss! Tom is sharing the two different ways to qualify an activity as passive, what it takes to become a professional real estate investor, and so much more! As always, Tom is an incredible wealth of information; you won’t want to miss episode 323!
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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 have less income to pay taxes on! Many high earning investors like to claim a loss, in order to lower their overall tax burden.
Tom explains that there are three classifications written into the tax code: ordinary, investment/portfolio, and passive. Losses in one category can only be deducted from income in the same category. This means that passive loss only pertains to passive income.
With some exceptions, rental real estate falls into the passive category. Tom explains that in order to claim passive loss on real estate income, one of two things can happen. Either the investor can move their rental income out of the passive category, or move other income into the passive category. The second scenario applies to those who make over $150k.
On today’s show, Tom is sharing the finer details of passive loss in the new tax code. We’ll talk about why and how to qualify as a professional investor. We’ll discuss depreciation, cost segregation, and section 179 of the tax law. Please join us for episode 323 of Investing in Real Estate!
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:
- How can you change a loss from passive to ordinary?
- What is in section 179 of the tax code?
- What are the three rules of becoming a professional investor?
- How can you find an incredible CPA?
- And much more?
Tax-Free Wealth by Tom Wheelwright
Loopholes of Real Estate by Garrett Sutton
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