Here’s a good news double header… Good news #1: You can be both a real estate investor and a real estate dealer with respect to your real estate portfolio. This puts you where you want to be. In control. Good news #2: By knowing just a few rules about dealer/investor classifications, you can dramatically increase your net worth. Want to find out more? Read my new article … [Read more...]
Passive income and losses
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Drive-time increases odds of deducting rental-property losses
It’s a fact … Your rental properties can provide a valuable tax shelter when you deduct your rental losses against other income. One important step to take if you want to deduct your losses is to pass the tax code’s 750-hour test. It’s one of the ways taxpayers get to prove that they are real-estate professionals. (See more about this below.) Looking for ways to accrue … [Read more...]
Audit-proof your time spent on rental properties
If you claim status as a tax-law-defined real-estate professional, you’ll be able to deduct your rental-property losses. But “claiming” that you’re a tax-law-defined real-estate professional is very different from proving that you are. And the IRS wants proof that you… Spend more than one-half of your personal service time in real-property trades or businesses in which … [Read more...]
Tax Time Bomb: Passive Foreign Investment Companies
Thinking about owning a passive foreign investment company (PFIC)? Perhaps through a (non-U.S.-owned) mutual fund? Our advice, in just one word, is… “don’t!” Why? Because the IRS punishes owners of PFICs with high tax-rates and extremely burdensome reporting requirements. You might think that all this doesn’t apply to you, but you may be in for a big, nasty surprise. You … [Read more...]
Beat the passive-loss rental-property rules
If you’re a savvy taxpayer, you want to deduct your business, rental, and non-rental losses whenever possible. Why? Because these deductions put cash in your pocket (which makes the losses easier to bear). But be aware. The passive-loss rules put your legitimate tax losses into a tax-loss prison and releases them only when you have passive income (or dispose of the … [Read more...]